The Investing Pros and Cons of SATS Ltd

Source: SATS

SATS Ltd (SGX: S58) is a company that provides food solutions and gateway services mainly to the aviation industry.

It has been a strong performer in our local stock market over the past five years with its share price up a total of 112%.

I took a look at its business recently to come up with a list of investing pros and cons. One pro is the company’s history of growth.

The table below shows SATS’s revenue, operating income, and return on equity over its last five fiscal years:

Source: SATS annual report

We can see that the company’s operating income has been steadily improving despite revenue falling. In other words, SATS’s operating margin has increased over time. The higher operating margin has led to an increase in the return on equity.

Now, here are the cons:

  • As already mentioned, revenue has been falling. SATS’ revenue of S$1.872 billion in FY2011-12 had become S$1.698 billion in FY2015-16
  • Its current price-to-earnings ratio of 23 is near a five-year high. It is also nearly double the SPDR STI ETF’s (SGX: ES3) PE ratio of 12. The SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of the Straits Times Index (SGX: ^STI).

It is of utmost importance for investors to dig deep into a stock and weigh its pros and cons before taking any action. What I’ve shown above is by no means a complete list, but it should still be useful as a starting point for further research. 

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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.