Spindex Industries Ltd Has Soared 27% In The Last 12 Months – A Closer Look At The Numbers

Singapore’s stock market, as represented by the Straits Times Index (SGX: ^STI), hasn’t performed well over the past year. To the point, the index has fallen by 16% from 3,363 points on 14 March 2015 to 2,829 currently.

But, that doesn’t mean that all stocks have had a rough time too. Spindex Industries Ltd (SGX: 564) would be one stock that has bucked the trend.

At its current share price of S$0.675, Spindex’s shares have gained 27% in the last 12 months. What’s even more impressive is that Spindex’s shares have soared by 170% since the start of 2012, a period which has seen the Straits Times Index put on merely 7%.

Spindex’s stock price gains may naturally prompt a question: Can the company’s shares continue being a market-beater?

An introduction

For a brief introduction, Spindex is an integrated solution provider of precision-machined components and assemblies.

The company, which has factories located in Singapore, Malaysia, China and Vietnam, has a geographically diverse business. For its fiscal year ended 30 June 2015 (FY2015), 43% of Spindex’s revenue came from China, 29% from the ASEAN region (excluding Singapore), 23% from the U.S., Europe, and other countries, and the rest from Singapore.

Room for more

At their current prices, Spindex’s shares are at a 52-week high. But, there are some aspects of the company which point to the potential for further growth in its business:

1. Steady revenue and profit growth

From FY2011 to FY2015, Spindex’s revenue had grown by 40% in total from S$82 million to S$114 million, according to data from S&P Global Market Intelligence. Meanwhile, its profit had spiked by 240% from S$3.7 million to S$12.4 million. You can also see how the company has generated pretty consistent top-line and bottom-line growth over the past five years in the chart below:

Spindex's revenue and profit from FY2011 to FY2015
Source: S&P Global Market Intelligence

2. Growth in the face of a tough market

In the first-half of Spindex’s FY2016 (the six months ended 31 December 2015), Spindex had seen its revenue and profit exhibit year-on-year growth of 13.7% and 26.7%, respectively. In the company’s earnings release, it commented that “business sentiments remained cautious [in the first-half of FY2016] as economic uncertainties prevailed.” But “despite the challenges,” Spindex still managed to generate double-digit revenue growth.

3. Healthy balance sheet

As of 31 December 2015, Spindex’s balance sheet looks pristine with cash and cash equivalents of S$25.8 million and total debt of just S$2.5 million. With its strong balance sheet, the company has the financial muscle to either capitalize on business opportunities or pay out dividends going forward.

Foolish Takeaway

Some investors are often troubled by the fact that shares which are near record highs may drop or pull back a great deal after any perceived euphoria is over.

But, it’s good to note that there’s no point in relying on a share’s 52-week high or low to make investing decisions. It’s far more important to dig deep into the share’s business fundamentals and think about its future five, 10, or even 20 years from now.

While Spindex has a number of positive things going for its business as I’ve mentioned, a deeper look into other aspects of the company is needed before any investing decision can be reached.

At its current share price of S$0.675, Spindex has a price-to-earnings (PE) ratio of just 5.6. In contrast, the SPDR STI ETF (SGX: ES3) – an exchange-traded fund tracking the Straits Times Index – has a PE ratio of 11.6 (as of last Friday).

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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 contributor James Yeo doesn’t own shares in any companies mentioned.