Examining Straco Corporation Limited's (SGX:S85) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess S85's latest performance announced on 30 September 2019 and weight these figures against its longer term trend and industry movements.
Did S85's recent performance beat its trend and industry?
S85's trailing twelve-month earnings (from 30 September 2019) of S$42m has increased by 1.3% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.6%, indicating the rate at which S85 is growing has accelerated. What's enabled this growth? Let's take a look at whether it is only a result of an industry uplift, or if Straco has experienced some company-specific growth.
In terms of returns from investment, Straco has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 9.7% exceeds the SG Hospitality industry of 4.1%, indicating Straco has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Straco’s debt level, has declined over the past 3 years from 21% to 16%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.6% to 9.6% over the past 5 years.
What does this mean?
Straco's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Straco gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Straco to get a more holistic view of the stock by looking at:
- Financial Health: Are S85’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.
- Valuation: What is S85 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether S85 is currently mispriced by the market.
- 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 30 September 2019. This may not be consistent with full year annual report figures.
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