Why Has Venture Corporation Ltd’s Stock Price Increased By 84% In The Last 6 Months?

Venture Corporation Ltd (SGX: V03) is an electronics manufacturing services provider. It has its fingers in a range of activities, such as printing & imaging; networking & communications; retail store solutions, and more.

Over the last six months, the company’s stock price has surged by 83.8% to S$22.53 currently. What may have caused this?

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 Venture

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

Source: Venture 2017 third quarter earnings press release

We can see that the company’s revenue and earnings per share (EPS) were both up strongly in the first nine months of 2017 on a year-on-year basis. Growth was also strong in the third quarter. Venture attributed its growth to strong execution of its customers’ programmes, and a deepening of its collaborative partnerships with strategic customers.

If you look at the growth in Venture’s earnings per share in the first nine months of 2017 – a 77% jump from 45.5 cents to 80.5 cents – it is roughly in line with the company’s stock price growth in the last six months. This indicates that it is the company’s stronger business performance that has propelled its stock price higher.

What’s next

Venture said in its earnings release that it will continue to forge relationships with high-growth partners who are leaders in their industry. If successful, investors can expect further growth from the company going forward.

Nevertheless, one thing to keep in mind is that at Venture’s current price, it is trading at 22.6 times trailing earnings. This is a rather lofty valuation, considering that it is near a five-year high.

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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.