Yahoo Finance Where Golden Agri-Resources Ltd’s (SGX:E5H) Earnings Growth Stands Against Its Industry
When Golden Agri-Resources Ltd (SGX:E5H) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Golden Agri-Resources 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 E5H has performed. Check out our latest analysis for Golden Agri-Resources
Commentary On E5H’s Past Performance
E5H’s trailing twelve-month earnings (from 31 March 2018) of S$48.33m has more than halved from S$399.62m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -40.65%, indicating the rate at which E5H is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and whether the rest of the industry is feeling the heat.
Revenue growth in the past few years, has been positive, nevertheless earnings growth has been declining. This suggest that Golden Agri-Resources has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the SG food industry has been enduring some headwinds over the prior year, leading to an average earnings drop of -10.89%. This is a major change, given that the industry has been delivering a positive rate of 3.15%, on average, over the past five years. This means whatever recent headwind the industry is experiencing, it’s hitting Golden Agri-Resources harder than its peers.
In terms of returns from investment, Golden Agri-Resources has not invested its equity funds well, leading to a 1.32% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.71% is below the SG Food industry of 3.30%, indicating Golden Agri-Resources’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Golden Agri-Resources’s debt level, has increased over the past 3 years from 0.99% to 1.75%.
What does this mean?
Golden Agri-Resources’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Golden Agri-Resources and its peers a riskier investment. You should continue to research Golden Agri-Resources to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for E5H’s future growth? Take a look at our free research report of analyst consensus for E5H’s outlook.
Financial Health: Is E5H’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 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.
