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3 Trends That Show Sheng Siong Group Ltd’s Strong Growth Momentum

Sheng Siong Group Ltd (SGX:OV8) certainly needs little introduction. It operates 48 supermarkets and grocery stores islandwide, under its namesake brand – Sheng Siong, and is located close to most major housing districts. In this article, I want to see how the company has done in recent times in terms of revenue, profits and cash flow.

Revenue trend

Over the past four to five years, Sheng Siong has delivered consistent revenue growth through the opening of new stores and the improved performance of its existing stores. Below is a chart illustrating their revenue performance during that period.

Source: SGX StockFacts

During this time, the group managed to grow its revenue by a compounded growth rate of 3.5% to S$841 million over the last 12 months from S$726 million in 2014.

Earnings per share trend

The earnings per share trend will give us a clearer idea on whether the company has been able to translate the sales growth into meaningful profits.

Source: SGX StockFacts

Over the last four to five years, Sheng Siong’s earnings per share has risen from $0.025 per share in 2014 to S$0.035 per share in the last 12 months. This translates to a compounded annual growth rate of 8.2%. This shows that Sheng Siong has been able to deliver stronger earnings growth than its revenue.

One of the main reasons for the faster pace of growth in its earnings is an improving net income margin. The company has been able to improve its net margins by 16 percentage points from 6.6% in 2014 to 8.4%.

Operating cash flow trend

We have all probably heard the phrase, “Cash is king”. In essence, it means that a company that can deliver strong operating cash flows has the financial muscle to withstand any economic shocks or to grow its business.

Sheng Siong has certainly excelled in this respect.

Source: SGX StockFacts

As you can see, cash flow from operations has increased steadily over the last few years. Furthermore, Sheng Siong has maintained a clean balance sheet with no long-term debt and a comfortable net cash position of S$78.6 million.

The Foolish bottom line

At the time of writing, shares of Sheng Siong exchanged hands at S$0.995 per share. This translates to a price-to-book ratio of 5.3 and a price-to-earnings ratio of 21.4.

At first glance, the above may seem like a rich valuation but considering Sheng Siong’s track record of growth and robust balance sheet, current prices may still prove to be a bargain over the long-term.

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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  Sheng Siong Group Ltd. Motley Fool Singapore contributor Jeremy Chia doesn't own shares in any companies mentioned.