Understanding how Singapore Exchange Limited (SGX:S68) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Singapore Exchange is doing by comparing its latest earnings with its long-term trend as well as the performance of its capital markets industry peers. See our latest analysis for Singapore Exchange

How Well Did S68 Perform?

S68’s trailing twelve-month earnings (from 31 March 2018) of S$364.76m has jumped 10.10% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 2.74%, indicating the rate at which S68 is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is solely attributable to industry tailwinds, or if Singapore Exchange has experienced some company-specific growth.

The hike in earnings seems to be driven by a robust top-line increase outpacing its growth rate of costs. Though this brought about a margin contraction, it has made Singapore Exchange more profitable. Eyeballing growth from a sector-level, the SG capital markets industry has been growing its average earnings by double-digit 10.10% in the prior twelve months, . This is a change from a volatile drop of -6.00% in the past few years.

In terms of returns from investment, Singapore Exchange has invested its equity funds well leading to a 35.92% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14.82% exceeds the SG Capital Markets industry of 3.15%, indicating Singapore Exchange has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Singapore Exchange’s debt level, has declined over the past 3 years from 43.08% to 41.74%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Singapore Exchange gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Singapore Exchange to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for S68’s future growth? Take a look at our free research report of analyst consensus for S68’s outlook.

2. Financial Health: Is S68’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.

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.