In This Article:
Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Duty Free International Limited’s (SGX:5SO) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Duty Free International
Was 5SO’s weak performance lately a part of a long-term decline?
For the purpose of this commentary, I like to 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 method enables me to examine various companies in a uniform manner using the most relevant data points. For Duty Free International, its most recent trailing-twelve-month earnings is RM41.67M, which compared to last year’s level, has fallen by a significant -42.71%. Since these figures are relatively short-term thinking, I’ve computed an annualized five-year figure for 5SO’s earnings, which stands at RM57.96M This doesn’t look much better, as earnings seem to have steadily been deteriorating over the longer term.
What could be happening here? Well, let’s look at what’s occurring with margins and whether the entire industry is facing the same headwind. Over the past few years, revenue growth has fallen behind which implies that Duty Free International’s bottom line has been driven by unmaintainable cost-reductions. Inspecting growth from a sector-level, the SG specialty retail industry has been growing its average earnings by double-digit 30.05% over the prior year, . This is a turnaround from a volatile drop of -5.71% in the past couple of years. This suggests that, in the recent industry expansion, Duty Free International has not been able to gain as much as its industry peers.
What does this mean?
Duty Free International’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I suggest you continue to research Duty Free International to get a more holistic view of the stock by looking at:
-
Financial Health: Is 5SO’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.
-
Valuation: What is 5SO 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 5SO is currently mispriced by the market.
-
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 28 February 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.