Understanding how Hong Leong Asia Ltd (SGX:H22) 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 Hong Leongia is doing by comparing its latest earnings with its long-term trend as well as the performance of its machinery industry peers. Check out our latest analysis for Hong Leongia
How H22 fared against its long-term earnings performance and its industry
I use 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 blend enables me to assess different stocks in a uniform manner using the latest information. Hong Leongia’s latest earnings -SGD68.1M, which compared to the previous year’s level, has become less negative. Given that these figures are fairly short-term thinking, I’ve estimated an annualized five-year figure for H22’s earnings, which stands at SGD6.7M.
Additionally, we can examine Hong Leongia’s loss by looking at what has been happening in the industry along with within the company. First, I want to briefly look into the line items. Revenue growth over past couple of years has been negative at -3.01%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the SG machinery industry has been growing its average earnings by double-digit 45.72% in the past year, and a flatter 0.69% over the past couple of years. This shows that whatever tailwind the industry is profiting from, Hong Leongia has not been able to gain as much as its industry peers.
What does this mean?
Though Hong Leongia’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 predict what will happen in the future and when. The most insightful step is to examine company-specific issues Hong Leongia may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Hong Leongia to get a better picture of the stock by looking at:
1. Financial Health: Is H22’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.