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Does Hi-P International Limited's (SGX:H17) -11% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

When Hi-P International Limited's (SGX:H17) announced its latest earnings (30 September 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Hi-P International's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not H17 actually performed well. Below is a quick commentary on how I see H17 has performed.

See our latest analysis for Hi-P International

How Did H17's Recent Performance Stack Up Against Its Past?

H17's trailing twelve-month earnings (from 30 September 2019) of S$103m has declined by -11% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 49%, indicating the rate at which H17 is growing has slowed down. Why could this be happening? Well, let's look at what's occurring with margins and if the rest of the industry is experiencing the hit as well.

SGX:H17 Income Statement, November 18th 2019

In terms of returns from investment, Hi-P International has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 9.1% exceeds the SG Electronic industry of 4.6%, indicating Hi-P International has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hi-P International’s debt level, has increased over the past 3 years from 0.3% to 20%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 18% to 12% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research Hi-P International to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for H17’s future growth? Take a look at our free research report of analyst consensus for H17’s outlook.
  2. Financial Health: Are H17’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.