The Three Numbers That Give Q&M Dental Teeth

Q&MOpen wide and say “Ah” or should that be “Wow!” Q&M Dental Group (SGX: QC7), which runs a network of dental outlets in Singapore, Malaysia and China, has delivered an above-average Return on Equity (RoE) for shareholders over the last three years.

Its RoE of 19% is almost double the return for the Singapore market as measured by the 30 companies that make up the Straits Times Index (SGX: ^STI).

Q&M’s Net Income Margin is not especially high, though. Its margin not only lags the market average but it is also approximately half that of Raffles Medical Group (SGX: R01). The company makes $8.70 on every $100 of sales. By comparison, Raffles Medical makes $18 on every $100 of turnover.

However, Q&M, which can trace its history to a single Bukit Batok practice in 1996, is efficient using its assets. Its Asset Turnover of 1.3 implies that the company is generating $1.30 for every dollar of asset used in the business. The average for Singapore’s largest companies is just $0.50 for every dollar of asset employed.

Interestingly, Q&M does not use excessive leverage in its business. The Leverage Ratio of 1.7 is about par for the Singapore market.

By extracting the three parts of Q&M financials, it is easy to see how the company’s use of resources gives it teeth. Its RoE of 19% is the product of a moderate Net Income Margin of 8.7%; an efficient Asset Turnover of 1.3 and a modest Leverage Ratio of 1.7.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.