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VICOM Ltd’s (SGX:V01) Earnings Dropped -3.76%, How Did It Fare Against The Industry?

In this commentary, I will examine VICOM Ltd’s (SGX:V01) latest earnings update (31 March 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the commercial services industry performed. As an investor, I find it beneficial to assess V01’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for VICOM

Did V01 perform worse than its track record and industry?

For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 many different companies on a more comparable basis, using the latest information. For VICOM, its most recent trailing-twelve-month earnings is S$26.66M, which, in comparison to the prior year’s level, has dropped by -3.76%. Since these values may be somewhat myopic, I’ve calculated an annualized five-year figure for V01’s earnings, which stands at S$27.92M This doesn’t seem to paint a better picture, since earnings seem to have consistently been diminishing over time.

SGX:V01 Income Statement Jun 7th 18
SGX:V01 Income Statement Jun 7th 18

What could be happening here? Let’s examine what’s going on with margins and whether the whole industry is feeling the heat. In the last few years, revenue growth has failed to keep up which suggests that VICOM’s bottom line has been driven by unsustainable cost-cutting. Scanning growth from a sector-level, the SG commercial services industry has been growing, albeit, at a subdued single-digit rate of 3.31% over the previous twelve months, and 3.86% over the past five years. This shows that any near-term headwind the industry is enduring, it’s hitting VICOM harder than its peers.

What does this mean?

Though VICOM’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that face an extended period of decline in earnings are going through some sort of reinvestment phase Although, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes VICOM and its peers a riskier investment. You should continue to research VICOM to get a better picture of the stock by looking at:

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  1. Financial Health: Is V01’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.

  2. Valuation: What is V01 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 V01 is currently mispriced by the market.

  3. 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 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.