After looking at Singapore Technologies Engineering Ltd’s (SGX:S63) latest earnings update (30 June 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Commentary On S63’s Past Performance
S63’s trailing twelve-month earnings (from 30 June 2018) of S$540m has jumped 19% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.3%, indicating the rate at which S63 is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is merely a result of industry tailwinds, or if Singapore Technologies Engineering has seen some company-specific growth.
In terms of returns from investment, Singapore Technologies Engineering has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.1% exceeds the SG Aerospace & Defense industry of 4.7%, indicating Singapore Technologies Engineering has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Singapore Technologies Engineering’s debt level, has increased over the past 3 years from 15% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 76% to 42% over the past 5 years.
What does this mean?
Singapore Technologies Engineering’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Singapore Technologies Engineering to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for S63’s future growth? Take a look at our free research report of analyst consensus for S63’s outlook.
- Financial Health: Are S63’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.
- 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 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.