After reading Koda Ltd's (SGX:BJZ) most recent earnings announcement (30 September 2019), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways.
Was BJZ weak performance lately part of a long-term decline?
BJZ's trailing twelve-month earnings (from 30 September 2019) of US$4.9m has declined by -18% 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 50%, indicating the rate at which BJZ is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Koda has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 9.0% exceeds the SG Consumer Durables industry of 5.2%, indicating Koda has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Koda’s debt level, has increased over the past 3 years from 8.1% to 10%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 28% to 0.9% over the past 5 years.
What does this mean?
Though Koda's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research Koda to get a more holistic view of the stock by looking at:
- Financial Health: Are BJZ’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.
- Valuation: What is BJZ worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BJZ is currently mispriced by the market.
- 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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