Investors with a long-term horizong may find it valuable to assess CEI Limited's (SGX:AVV) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how CEI is currently performing.

See our latest analysis for CEI

Was AVV's weak performance lately a part of a long-term decline?

AVV's trailing twelve-month earnings (from 31 December 2019) of S$7.2m has declined by -3.8% 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 -3.9%, indicating the rate at which AVV is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and whether the entire industry is experiencing the hit as well.

In terms of returns from investment, CEI has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 10% exceeds the SG Electronic industry of 4.6%, indicating CEI has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for CEI’s debt level, has declined over the past 3 years from 23% to 19%.

What does this mean?

Though CEI's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research CEI to get a better picture of the stock by looking at:

1. Financial Health: Are AVV’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 AVV 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 AVV 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 December 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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