For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Transit-Mixed Concrete Ltd’s (SGX:570) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. Check out our latest analysis for Transit-Mixed Concrete
How Did 570’s Recent Performance Stack Up Against Its Past?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique allows me to assess different companies on a similar basis, using the latest information. “For Transit-Mixed Concrete, its “, most recent earnings is SGD0.4M, which, against last year’s level, has fallen by a non-trivial -88.47%. Given that these figures may be relatively short-term thinking, I have created an annualized five-year figure for Transit-Mixed Concrete’s net income, which stands at SGD3.4M. This doesn’t seem to paint a better picture, since earnings seem to have steadily been deteriorating over the longer term.
Why could this be happening? Let’s examine what’s transpiring with margins and whether the entire industry is feeling the heat. Revenue growth over the past few years, has been positive, however, earnings growth has not been able to catch up, meaning Transit-Mixed Concrete has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the SG basic materials industry has been enduring severe headwinds over the last few years, leading to an average earnings drop of -88.47% in the most recent year. This means any near-term headwind the industry is experiencing, Transit-Mixed Concrete is less exposed compared to its peers.
What does this mean?
Though Transit-Mixed Concrete’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that face a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase . Although, if the whole industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Transit-Mixed Concrete and its peers a riskier investment. You should continue to research Transit-Mixed Concrete to get a better picture of the stock by looking at:
1. Financial Health: Is 570’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.