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Why Has Riverstone Holdings Limited’s Stock Price Climbed By 20% In The Last 12 Months?

Riverstone Holdings Limited (SGX: AP4) is a Malaysia-based company that produces nitrile gloves for use in the cleanroom and medical industries.

Over the last 12 months, the company’s stock price has climbed by 20%. What may have caused this?

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Reasons for a price increase

There can be many reasons behind a stock’s price increase. 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 profits.

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 Riverstone

In Riverstone’s case, I believe it’s the former at work. The table below is a condensed income statement from Riverstone for the third quarter of 2017:

Source: Riverstone 2017 third quarter earnings press release

We can see that the company’s revenue and earnings per share (EPS) in the third quarter of 2017 were both up by double-digit percentages when compared to 2016’s third quarter.

The company’s growth was driven by an improvement in demand for its premium healthcare and cleanroom gloves, and a better sales mix. Riverstone’s expansion plan is also on track, and the company expects to have a total production capacity of 7.6 billion gloves per year by the end of 2017, up from 6.2 billion at end-2016. The company’s current plan is to reach an annual production capacity of 10.4 billion gloves by end-2019.

Riverstone’s positive business performance in the third quarter of 2017, along with the reaffirmation of its expansion plan, may have contributed to the increase in its stock price.

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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. The Motley Fool Singapore has a recommendation for Riverstone.