There are around 700 companies listed on the stock exchange in Singapore. Out of those, there are a number of companies that have similar business operations. It is sometimes hard to determine which firm in a particular industry is better than its peers.
In this article, we will make some quick-and-dirty comparisons between two companies operating in the food and beverage industry, JUMBO Group Ltd (SGX: 42R) and No Signboard Holdings Ltd (SGX: 1G6), to determine which might give you more bang for the buck.
Introducing the Contenders
JUMBO Group is well-known for its eponymous seafood restaurants around Singapore that serve the famous chilli crab. Its other brand of restaurants include JPot, Ng Ah Shio Bak Kut Teh, Chui Huay Lim Teochew Cuisine and J Cafe. JUMBO Group went public in November 2015.
On the other hand, No Signboard Holdings also runs seafood restaurants. Other than the restaurants, it runs a beer business and a ready meal business. The company was listed in November 2017.
The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as of the closing prices on 16 January 2018. Do note that all figures quoted in the tables that follow are for the full year ended 30 September 2017 (FY2017) for both companies, unless otherwise stated.Round 1: Profitability
In the first round, we will analyse the profitability of the companies in terms of profit margins and Return on Equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.For every dollar of revenue created by JUMBO Group, only 10 cents were generated as profits, but for No Signboard Holdings, every dollar of revenue gave some 32 cents in profits. This shows that No Signboard Holdings is more profitable than its counterpart. Furthermore, No Signboard Holdings has a much higher ROE than JUMBO Group.
Winner: No Signboard Holdings.
Round 2: Growth
In the second round, we will compare the compounded annual growth rate (CAGR) of revenue and net profit of the two firms for the past four financial years. Firms that can grow their sales and profits steadily over time should also see their share price rise.JUMBO Group has a superior revenue and net profit growth as compared to its peer.
Winner: JUMBO Group.
Round 3: Valuation
As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price.
We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two companies. The values below are as of the closing prices on 16 January 2018.
No Signboard Holdings has a lower PE ratio than JUMBO Group. However, it has a higher PS ratio than its counterpart and has not declared any dividend for 2017. It does not have a fixed dividend policy, but it intends to distribute at least 30% of its net profit after tax in 2018 and 2019 as dividends.
Winner: JUMBO Group, with its lower PS ratio and the presence of dividends.
The Foolish Bottom Line
Final Score: 2-1 to JUMBO Group, as it has triumphed over No Signboard Holdings in two out of the three rounds.
However, we have yet to look at other important aspects of the company such as its balance sheet strength, free cash flow situation, growth prospects, and so on. Potential investors interested in JUMBO Group should research more on the company before investing their money. This simple exercise would help to take some heavy-lifting off your back though.
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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 Sudhan P doesn’t own shares in any companies mentioned.