QAF Limited’s Stock Price Is Up 34% In The Last 12 Months: Here’s Why

QAF Limited (SGX: Q01) is a food production company. Its business activities include bakery operations, pork production, food processing and distribution, feed milling, food trading and distribution, food manufacturing, wine distribution, and the ownership and leasing of warehouses.

Some of the more prominent consumer food brands the company has in its portfolio are GardeniaCowhead, and Farmland.

Over the last 12 months, the company’s stock price has climbed by 34%, which is impressive given that the market has gained just 12% in the same period. What may have caused QAF’s stock price to rise?

Reasons for a gain

There are many reasons why a stock’s price would rise.

But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related. The former deals with how a stock’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock’s profit.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The case with QAF

It appears that both forces may be at work in QAF’s case. Let me explain.

QAF’s latest earnings, released in late February, was for 2016. It contained a few things worth leaning about its business:

1. All three of QAF’s business segments achieved revenue growth in 2016 after accounting for the one-off event of the deconsolidation of a Malaysia-based subsidiary.

2. Excluding the one-off event, QAF’s profit after tax in 2016 would be S$57 million, 4% higher than in 2015. As for the profit attributable to shareholders, it would have been S$61 million, a 16% increase over 2015.

So, there have clearly been improvements in QAF’s financial performance in 2016. Yet, it’s worth noting that the increase in its share price over the last 12 months is nearly twice the growth in its earnings (after adjusting for one-off items).

Thus, the rise in QAF’s stock price, in my opinion, is a combination of both good results and better investor sentiment.

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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.