What Investors Should Know About Wilmar International Limited’s Historical Business Growth

Growth investors are investors who aim to invest in companies that are able to grow their businesses at high rates in the future.

One way that growth investors try to estimate how well a company’s business may perform in the years ahead is to look at its historical track record. In investing, the past is not a predictor of the future. But, an understanding of history can still help in setting expectations for what could possibly happen.

In general, when growth investors study a company’s past, they are looking out for above average growth rates (say 10% or more annually) and consistent growth. In here, I want to have a quick analysis of Wilmar International Limited (SGX: F34) from these two perspectives.

Here’s a table showing Wilmar’s revenue and net profit from 2010 to 2015:

Wilmar revenue and net profit table
Source: Wilmar’s annual reports

First, let’s assess whether Wilmar has managed to grow at above-average rates in the years under study.

As a whole, its revenue is up by only 28% whilst its net profit is down by 20%. When these numbers are annualised, we end up with compound annual growth rates (CAGRs) of 5% and -4.4%, for Wilmar’s revenue and net profit, respectively.

Next, we will have a look at the consistency of growth for Wilmar. For that, let’s turn to the chart below, which plots the changes in the company’s revenue, operating income, and net profit in each year from 2011 to 2015:

Wilmar revenue and net profit growth chart
Source: Wilmar’s annual reports

It’s obvious that Wilmar has a volatile growth profile. For example, if we look at the company’s revenue, we can see that it has grown in only one out of the last five years.

There is also no consistency in the growth rates for its and net profit.

A Foolish conclusion

In sum, based on what we have seen above, Wilmar has displayed neither consistent historical growth, nor above-average growth rates.

This does not mean that Wilmar will necessarily be a lousy growth investment though. There are other perspectives of the company that need to be evaluated. In the case of Wilmar, given that it’s in the business of producing palm oil and the related consumer products, some other useful areas to study could be things such as the company’s plantation area, production volume, and the future price of crude palm oil.

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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.