Measuring LHT Holdings Limited’s (SGX:BEI) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess BEI’s recent performance announced on 30 June 2017 and compare these figures to its historical trend and industry movements. See our latest analysis for LHT Holdings
Did BEI perform worse than its track record and industry?
I use data from the most recent 12 months, 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 method allows me to assess many different companies in a uniform manner using new information. “For LHT Holdings, its “, latest earnings is SGD2.6M, which, against the prior year’s level, has plunged by a non-trivial -40.86%. Given that these figures are somewhat short-term thinking, I have computed an annualized five-year value for BEI’s net income, which stands at SGD3.8M. This doesn’t seem to paint a better picture, since earnings seem to have steadily been deteriorating over time.
What could be happening here? Well, let’s take a look at what’s occurring with margins and whether the whole industry is facing the same headwind. Revenue growth in the past few years, has been positive, however earnings growth has been declining. This means LHT Holdings has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the SG forestry industry has been growing its average earnings by double-digit 31.10% over the previous year, and 12.27% over the previous few years. This shows that whatever uplift the industry is profiting from, LHT Holdings has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience a prolonged period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry expansion and disruption. I recommend you continue to research LHT Holdings to get a better picture of the stock by looking at:
1. Financial Health: Is BEI’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. Valuation: What is BEI 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 BEI is currently mispriced by the market.