Since peaking at S$1.10 in March this year, Valuetronics Holdings Limited‘s (SGX: BN2) share price has fallen by nearly 40% to S$0.685 currently.
Can Valuetronics’ share price ever return to grace? There’s no easy answer, but a look at the long term history of Valuetronics’ business-growth can provide us some clues. A company’s share price can gyrate wildly over the short term, but over the long run, it is the company’s underlying business that drives its share price. And, analysing a company’s track record gives us the basis to forecast what lies ahead.
As a quick background, Valuetronics is an integrated electronics manufacturing services provider that is headquartered in Hong Kong. It offers a combination of design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products.
In its fiscal year ended 31 March 2018 (FY2018), 51% of Valuetronics’ revenue came from its Industrial and Commercial Electronics segment. The remaining 49% of Valuetronics’ revenue came from the Consumer Electronics business.
Although Valuetronics is headquartered in Hong Kong, the US is the company’s largest market, accounting for 42% of total revenue in FY2018. China is second, with a share of 31%.
The table below is a snapshot of Valuetronics’ important financial metrics from FY2014 to FY2018:
Source: Valuetronics annual report
Here are a few points worth noting:
1. Revenue had increased by 17% from HK$2.43 billion to HK$2.85 million in the period we’re observing. Yet, the growth did not occur in a straight line, since revenue declined in FY2015 and FY2016, before recovering in FY2017.
2. Profit attributable to shareholders climbed by 38% – or 8.5% per year – from HK$147.9 million in FY2014 to HK$204.7 million in FY2018. Similarly, EPS stepped up at a compound annual growth rate (CAGR) of 6.9%. Valuetronics’ profit as well as EPS also displayed the same up-and-down swings as its revenue.
3. The company’s dividend was maintained at HK$0.20 per share for a few years, before increasing by 35% to HK$0.27 per share. The growth in Valuetronics’ dividend for the timeframe we’re studying is at a similar magnitude to the increase in the company’s profit.
In sum, Valuetronics had delivered growth in revenue, profits, and dividend over the past five years, which is commendable. Yet, investors should be mindful that the company’s growth had been volatile. If the company’s profit in FY2018 is at a cyclical peak, there’s a possibility of further share price declines ahead.
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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.