When Bonvests Holdings Limited (SGX:B28) released its most recent earnings update (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Bonvests Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see B28 has performed. Check out our latest analysis for Bonvests Holdings
How Well Did B28 Perform?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 assess various companies on a similar basis, using the most relevant data points. For Bonvests Holdings, the most recent earnings is SGD25.2M, which, in comparison to the prior year’s level, has sunken by a non-trivial -48.70%. Since these figures may be fairly short-term thinking, I’ve estimated an annualized five-year figure for Bonvests Holdings’s net income, which stands at SGD45.1M. This doesn’t look much better, since earnings seem to have steadily been diminishing over time.
Why could this be happening? Well, let’s look at what’s occurring with margins and if the whole industry is facing the same headwind. Revenue growth over the past couple of years, has been positive, nevertheless earnings growth has been falling. This means Bonvests Holdings has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the SG industrials industry has been growing its average earnings by double-digit 10.56% over the previous twelve months, . This is a change from a volatile drop of -3.97% in the previous few years. This means that, in the recent industry expansion, Bonvests Holdings has not been able to realize the gains unlike its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience an extended period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry disruption and growth. You should continue to research Bonvests Holdings to get a more holistic view of the stock by looking at:
1. Financial Health: Is B28’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.