After looking at Rowsley Ltd’s (SGX:A50) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Rowsley

Commentary On A50’s Past Performance

I look at the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to analyze many different companies on a more comparable basis, using new information. For Rowsley, its most recent earnings (trailing twelve month) is -S$56.15M, which, relative to the prior year’s figure, has become less negative. Given that these figures may be fairly nearsighted, I’ve estimated an annualized five-year figure for A50’s net income, which stands at -S$52.19M. This means Rowsley has historically performed better than recently, though it seems like earnings are now heading back in the right direction again.

We can further evaluate Rowsley’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Rowsley’s top-line has increased by 19.93% on average, indicating that the company is in a high-growth phase with expenses racing ahead revenues, leading to annual losses. Eyeballing growth from a sector-level, the SG professional services industry has been enduring some headwinds over the past few years, leading to an average earnings drop of -16.37% in the most recent year. This means though Rowsley is currently loss-making, any near-term headwind the industry is experiencing, Rowsley is relatively better-cushioned than its peers.

What does this mean?

Though Rowsley’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most useful step is to examine company-specific issues Rowsley may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research Rowsley to get a better picture of the stock by looking at:

• 1. Financial Health: Is A50’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. 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 2017. 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.