Examining InnoTek Limited’s (SGX:M14) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess M14’s latest performance announced on 31 March 2018 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for InnoTek

Commentary On M14’s Past Performance

I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to analyze various companies on a more comparable basis, using the most relevant data points. For InnoTek, its latest trailing-twelve-month earnings is S$7.41M, which, against the prior year’s figure, has dropped by a significant -49.26%. Given that these figures are somewhat short-term, I have calculated an annualized five-year figure for InnoTek’s earnings, which stands at -S$6.06M This shows that despite the fact that earnings declined from last year, over a longer period of time, InnoTek’s profits have been rising on average.

What’s enabled this growth? Well, let’s take a look at if it is merely owing to industry tailwinds, or if InnoTek has experienced some company-specific growth. Over the last couple of years, InnoTek expanded bottom-line, while its top-line fell, by successfully controlling its costs. This resulted in to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the SG machinery industry has been enduring some headwinds over the past twelve months, leading to an average earnings drop of -2.93%. This is a major change, given that the industry has constantly been delivering a a strong growth of 12.67% in the past half a decade. This shows that any recent headwind the industry is enduring, it’s hitting InnoTek harder than its peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research InnoTek to get a better picture of the stock by looking at:

1. Financial Health: Is M14’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.

2. Valuation: What is M14 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 M14 is currently mispriced by the market.

3. 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 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.