After looking at mDR Limited's (SGX:A27) latest earnings update (30 June 2019), 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.
Could A27 beat the long-term trend and outperform its industry?
A27's trailing twelve-month earnings (from 30 June 2019) of S$4.5m has increased by 6.1% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 46%, indicating the rate at which A27 is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, mDR has fallen short of achieving a 20% return on equity (ROE), recording 3.5% instead. Furthermore, its return on assets (ROA) of 2.5% is below the SG Electronic industry of 4.8%, indicating mDR's are utilized less efficiently. However, its return on capital (ROC), which also accounts for mDR’s debt level, has increased over the past 3 years from 3.0% to 4.1%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as mDR gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research mDR to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for A27’s future growth? Take a look at our free research report of analyst consensus for A27’s outlook.
- Financial Health: Are A27’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 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 email@example.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.