MENU

The 3 Numbers That Make The Hour Glass Tick

Hourglass logoTime will tell, as the saying goes. In the case of The Hour Glass (SGX: E5P), the watch retailer has stood the test of time. Since its founding in 1979, the company has become a go-to destination for upmarket time pieces.

The watch retailer boasts one of the higher Return on Equity (RoE) in the Singapore market. At 19%, the company generates $19 for every $100 of shareholder equity. The market average is around 11%.

The Hour Glass, as you would expect, has a health Net Income Margin. It produces $9 of bottom-line profit on every $100 of sales. Around 80% of its revenues are generated in Southeast Asia and Australia, while the rest is generated from Northeast Asia.

Even though its margin is high in comparison to, say, retailers such as Challenger Technologies (SGX: 573) and Courts Asia (SGX: RE2), it lags the wider market. The average Net Income margin for the 30 companies that make up the Straits Times Index (SGX: ^STI) is around 19%.

For a retailer of expensive timepieces, The Hour Glass has a remarkably high Asset Turnover. It generates $1.80 of revenues for every $1 of asset employed in the business. The average for Singapore’s blue chips is $0.50 for every dollar of asset used.

The watch seller does not use excessive leverage in its business. Its Leverage Ratio of 1.2 is below the market average of 1.7.

By dismantling the financial ratios for the company, it is easy to see how the company generate a return for shareholders. It is the product of a good Net Income Margin of 9%; a decent Asset Turnover of 1.8 and a small Leverage Ratio of 1.2.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your FREE subscription to Take Stock — Singapore, The Motley Fool’s free investing newsletter. Written by David Kuo, Take Stock — Singapore tells you exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead.

Like us on Facebook to keep up-to-date with our latest news and articles. The Motley Fool’s purpose is to help the world invest, better.

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.