For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on SBS Transit Ltd (SGX:S61) useful as an attempt to give more color around how SBS Transit is currently performing.
Commentary On S61's Past Performance
S61's trailing twelve-month earnings (from 30 June 2019) of S$89m has jumped 47% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 40%, indicating the rate at which S61 is growing has accelerated. What's the driver of this growth? Let's take a look at whether it is solely owing to industry tailwinds, or if SBS Transit has seen some company-specific growth.
In terms of returns from investment, SBS Transit has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 8.2% exceeds the SG Transportation industry of 5.4%, indicating SBS Transit has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for SBS Transit’s debt level, has increased over the past 3 years from 4.1% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 117% to 20% over the past 5 years.
What does this mean?
Though SBS Transit's past data is helpful, it is only one aspect of my investment thesis. While SBS Transit has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research SBS Transit to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for S61’s future growth? Take a look at our free research report of analyst consensus for S61’s outlook.
- Financial Health: Are S61’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.