When Compact Metal Industries Ltd (SGX:T4E) released its most recent earnings update (30 September 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Compact Metal Industries’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not T4E actually performed well. Below is a quick commentary on how I see T4E has performed. See our latest analysis for Compact Metal Industries
How T4E fared against its long-term earnings performance and its industry
I prefer to 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 enables me to analyze various companies on a more comparable basis, using the latest information. For Compact Metal Industries, the latest twelve-month earnings -SGD0.7M, which, against the previous year’s level, has become less negative. Since these values may be somewhat short-term thinking, I have calculated an annualized five-year value for T4E’s net income, which stands at -SGD0.4M. This shows that, Compact Metal Industries has historically performed better than recently, while it seems like earnings are now heading back in the right direction again.
We can further assess Compact Metal Industries’s loss by looking at what’s going on in the industry along with within the company. First, I want to briefly look into the line items. Revenue growth over the past couple of years has been negative at -11.05%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Eyeballing growth from a sector-level, the SG building industry has been enduring some headwinds over the previous couple of years, leading to an average earnings drop of -14.33% in the most recent year. This shows that whatever recent headwind the industry is experiencing, the impact on Compact Metal Industries has been softer relative to its peers.
What does this mean?
Though Compact Metal Industries’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Compact Metal Industries may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Compact Metal Industries to get a more holistic view of the stock by looking at: