What Investors Should Know About Raffles Medical Group Ltd’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 Raffles Medical Group Ltd (SGX: BSL) from these two perspectives.

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

Raffles Medical Group revenue, operating profit, and net profita table
Source: Raffles Medical annual reports

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

As a whole, its revenue, operating profit, and net profit are up by 72%, 53%, and 53% respectively. When these numbers are annualised, we end up with compound annual growth rates (CAGRs) of 11.5%, 8.9%, and 8.9%, for Raffles Medical’s revenue, operating profit, and net profit, respectively.

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

Raffles Medical Group growth rates table
Source: Raffles Medical annual reports

What we can see is that the three metrics for Raffles Medical have been growing in each year for the timeframe under study.

But revenue has clearly grown at a more consistent rate as compared to operating profit and net profit. The growth rates for operating profit and net profit have both trended downwards after 2013.

A Foolish conclusion

In sum, based on what we have seen above, Raffles Medical has displayed above-average as well as consistent growth in revenue. But, the same can’t be said for the company’s operating profit and net profit – investors may want to find out whether the falling growth rates in 2014 and 2015 for the two metrics is something that would persist for the long-term.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow 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. The Motley Fool Singapore has recommended shares of Raffles Medical Group. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.