Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Teckwah Industrial Corporation Ltd's (SGX:561) 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.
Commentary On 561's Past Performance
561's trailing twelve-month earnings (from 30 September 2019) of S$8.0m has declined by -12% 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 -5.2%, indicating the rate at which 561 is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Teckwah Industrial has fallen short of achieving a 20% return on equity (ROE), recording 6.1% instead. However, its return on assets (ROA) of 4.0% exceeds the SG Commercial Services industry of 3.9%, indicating Teckwah Industrial has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Teckwah Industrial’s debt level, has declined over the past 3 years from 12% to 7.3%.
What does this mean?
Teckwah Industrial's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. In some cases, companies that endure an extended period of reduction in earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes Teckwah Industrial and its peers a higher risk investment. You should continue to research Teckwah Industrial to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 561’s future growth? Take a look at our free research report of analyst consensus for 561’s outlook.
- Financial Health: Are 561’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 September 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.