MENU

The Three Numbers That Lift Ezion Holdings

ezionSingapore boasts a host of companies that provide support services to the offshore oil and gas industry. But none have caught the attention of the market more than Ezion Holdings (SGX: 5ME).

Over the last decade, shares in the company have jumped almost 60 fold. Ezion also exhibits one of the highest Return on Equity (RoE) on the market. At 25.3%, Ezion’s RoE is almost three times higher than the 30 companies that make up the Straits Times Index (SGX: ^STI).

Ezion’s high Return on Equity is partly due to the company’s above average Net Income Margin. At 56.9%, the company, which charters offshore assets, generates around $57 in bottom-line profits for every $100 of sales. What’s more, the margins have been consistently high over the last few years.

Interestingly, Ezion’s Asset Turnover is not especially impressive. It means that the company does not generate high levels of revenues for the amount of asset employed in the business. Its Asset Turnover of 1.7 is over two times lower than the market average.

Ezion, which charters self-propelled jack-up rigs, also employs are fair amount of leverage. Its Leverage Ratio of 2.5 is higher than the market average of 1.7.

By taking apart Ezion’s Return on Equity, we can begin to see what makes the company tick. Its RoE of 25.3% is the product of a high Net Income Margin of 56.9%; a low Asset Turnover of 0.17 and hefty dollop of Leverage ratio of 2.5.

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.