For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Soup Restaurant Group Limited (SGX:5KI) useful as an attempt to give more color around how Soup Restaurant Group is currently performing. See our latest analysis for Soup Restaurant Group
Commentary On 5KI’s Past Performance
To account for any quarterly or half-yearly updates, 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 allows me to examine different companies on a similar basis, using the most relevant data points. Soup Restaurant Group’s latest earnings is SGD1.4M, which, in comparison to the previous year’s figure, has risen by 21.29%. Given that these values are somewhat myopic, I’ve determined an annualized five-year figure for 5KI’s net income, which stands at SGD1.2M. This suggests that, generally, Soup Restaurant Group has been able to increasingly improve its profits over the past few years as well.
What’s the driver of this growth? Let’s take a look at if it is merely attributable to an industry uplift, or if Soup Restaurant Group has seen some company-specific growth. Although both top-line and bottom-line growth rates in the past few years, were, on average, negative, earnings were more so. While this has led to a margin contraction, it has lessened Soup Restaurant Group’s earnings contraction. Scanning growth from a sector-level, the SG hospitality industry has been growing, albeit, at a unexciting single-digit rate of 9.90% over the prior twelve months, . This is a change from a volatile drop of -4.63% in the past couple of years. This shows that, in the recent industry expansion, Soup Restaurant Group is able to amplify this to its advantage.
What does this mean?
Soup Restaurant Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Soup Restaurant Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is 5KI’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.