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When Singapore Technologies Engineering Ltd (SGX:S63) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Singapore Technologies Engineering has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see S63 has performed.
Check out our latest analysis for Singapore Technologies Engineering
Despite a decline, did S63 underperform the long-term trend and the industry?
S63’s trailing twelve-month earnings (from 31 March 2019) of S$508m has declined by -2.5% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -2.0%, indicating the rate at which S63 is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Singapore Technologies Engineering has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 6.7% is below the SG Aerospace & Defense industry of 6.9%, indicating Singapore Technologies Engineering’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for Singapore Technologies Engineering’s debt level, has increased over the past 3 years from 11% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 44% to 31% over the past 5 years.
What does this mean?
Though Singapore Technologies Engineering’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that endure a drawn out period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. You should continue to research Singapore Technologies Engineering to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for S63’s future growth? Take a look at our free research report of analyst consensus for S63’s outlook.
- Financial Health: Are S63’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.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at [email protected] This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.