The Glove Stock That Has Displayed Better Growth: Riverstone Holdings Limited vs. Hartalega Holdings Berhad

Nitrile gloves manufacturer Riverstone Holdings Limited (SGX: AP4) is one of the better performing stocks in Singapore’s market over the past five years, with its share price jumping by 334%.

But Riverstone was hardly alone. It appears that being a gloves manufacturer has been a good thing for other companies too. Malaysia-listed rubber gloves maker Hartalega Holdings Berhad (KLSE: 5168.KL) was also a great stock to own for its investors over the past five years – its share price has climbed by a commendable 197%.

It might be interesting to see which of the two has had the faster growth, stronger profit margins, and higher returns on equity.


Growth is an important component of a company’s value. The faster a company can grow its business in the years ahead, the more valuable it could possibly be.

Here’s how Riverstone and Hartalega stack up:

Riverstone and Hartalega revenue and profit growth
Source: S&P Global Market Intelligence

We can clearly see that Riverstone has had faster revenue as well as profit growth over the past five years when compared with Hartalega.

Profit margins

I’m going to look at both companies’ gross margin here. The gross margin measures the percentage of profit a company makes for each dollar in sales it has after deducting all the costs that are directly related to the sale.

Changes in gross margin can be a sign of how much the pricing power of a company has shifted over the years.

The following table shows Riverstone and Hartalega’s gross profit margin:

Riverstone and Hartalega gross margin
Source: S&P Global Market Intelligence

There are two different trends taking place here. With Riverstone, the company’s gross profit margin has been steadily increasing. On the other hand, the self-same number for Hartalega has been decreasing.

Return on equity

The return on equity is a measure of how much profit a company can make for each shareholders’ dollar it has in its possession. In general, if we assume that a company is not operating with a highly-geared balance sheet, the return on equity can also be seen as a gauge for the quality of a business, with a higher return on equity being more desirable.

The table below illustrates the returns on equity for Riverstone and Hartalega:

Riverstone and Hartalega return on equity
Source: S&P Global Market Intelligence

In a similar manner to the gross margin picture we just saw, the two companies’ returns on equity have moved in contrasting directions. Whereas Hartalega’s return on equity has declined by nearly half from fiscal 2012 (fiscal year ended 31 March 2012) to fiscal 2016, Riverstone’s has increased markedly.

 A Fool’s take

As seen above, when Riverstone is compared with Hartalega, it is the former that has had stronger revenue and profit growth, fatter gross margins, and rising returns on equity. But, it should be noted that a deeper study is needed before any investing conclusions can be reached with the pair.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.