After reading Silverlake Axis Ltd’s (SGX:5CP) latest earnings update (30 September 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 5CP has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. View our latest analysis for Silverlake Axis
Did 5CP beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, I 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 technique enables me to analyze various companies on a more comparable basis, using the latest information. For Silverlake Axis, its most recent trailing-twelve-month earnings is MYR709.1M, which, in comparison to the prior year’s figure, has jumped by a significant 89.71%. Since these figures are relatively myopic, I’ve calculated an annualized five-year figure for Silverlake Axis’s earnings, which stands at MYR296.7M. This suggests that, generally, Silverlake Axis has been able to steadily raise its bottom line over the last few years as well.
What’s the driver of this growth? Let’s take a look at whether it is solely owing to an industry uplift, or if Silverlake Axis has experienced some company-specific growth. Over the past few years, Silverlake Axis expanded its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Viewing growth from a sector-level, the SG software industry has been growing its average earnings by double-digit 15.20% in the prior year, and 10.54% over the past five years. This means that any tailwind the industry is enjoying, Silverlake Axis is able to amplify this to its advantage.
What does this mean?
Though Silverlake Axis’s past data is helpful, it is only one aspect of my investment thesis. While Silverlake Axis 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 Silverlake Axis to get a more holistic view of the stock by looking at:
1. Financial Health: Is 5CP’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.