In This Article:
When Hock Lian Seng Holdings Limited (SGX:J2T) released its most recent earnings update (30 September 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Hock Lian Seng Holdings’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not J2T actually performed well. Below is a quick commentary on how I see J2T has performed.
See our latest analysis for Hock Lian Seng Holdings
Commentary On J2T’s Past Performance
J2T’s trailing twelve-month earnings (from 30 September 2018) of S$24m has declined by -2.3% 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 -11%, indicating the rate at which J2T is growing has slowed down. What could be happening here? Let’s examine what’s transpiring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Hock Lian Seng Holdings has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 6.1% exceeds the SG Construction industry of 4.0%, indicating Hock Lian Seng Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hock Lian Seng Holdings’s debt level, has declined over the past 3 years from 44% to 13%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that endure a drawn out period of reduction in earnings are going through some sort of reinvestment phase However, if the entire industry is struggling to grow over time, it may be a sign of a structural change, which makes Hock Lian Seng Holdings and its peers a higher risk investment. You should continue to research Hock Lian Seng Holdings to get a better picture of the stock by looking at:
-
Future Outlook: What are well-informed industry analysts predicting for J2T’s future growth? Take a look at our free research report of analyst consensus for J2T’s outlook.
-
Financial Health: Are J2T’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.
-
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 30 September 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.