Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Overseas Education Limited's (SGX:RQ1) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
How Did RQ1's Recent Performance Stack Up Against Its Past?
RQ1's trailing twelve-month earnings (from 30 June 2019) of S$6.9m has declined by -2.3% 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 -33%, indicating the rate at which RQ1 is growing has slowed down. Why is this? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Overseas Education has fallen short of achieving a 20% return on equity (ROE), recording 5.1% instead. Furthermore, its return on assets (ROA) of 4.7% is below the SG Consumer Services industry of 5.3%, indicating Overseas Education's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Overseas Education’s debt level, has increased over the past 3 years from 5.6% to 6.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 103% to 87% over the past 5 years.
What does this mean?
Though Overseas Education's past data is helpful, it is only one aspect of my investment thesis. Usually companies that experience a prolonged period of decline in earnings are undergoing some sort of reinvestment phase Though if the whole industry is struggling to grow over time, it may be a sign of a structural shift, which makes Overseas Education and its peers a riskier investment. I suggest you continue to research Overseas Education to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RQ1’s future growth? Take a look at our free research report of analyst consensus for RQ1’s outlook.
- Financial Health: Are RQ1’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.
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