Long term investors seek companies that can sustain, or better still, grow their profitability for the foreseeable future.
As a matter of fact, no one can accurately predict the future, thus, the ability of a company to consistently be profitable over the long term. Thus, average investors might want to limit their investments to those companies that have a more predictable business, or in other words, blue chips.
Now, the conventional wisdom is that blue chip companies are boring investments since they don’t usually grow much given their size. This is true, to a certain extent. Yet, there are some blue chip companies that continued to grow their profitability over time, despite their size.
Here, we will look at three blue chip companies that more than doubled their profits in the last decade. We explored the first two candidates, namely DBS Group Holdings Ltd (SGX: D05) and Thai Beverage Public Company Limited (SGX: Y92) in our previous article here.
In this article, we will look at the final candidate, which is Venture Corporation Ltd (SGX: V03).
As a quick introduction, Venture Corporation is an electronics manufacturing services provider with expertise in a wide range of activities.
In the last decade, Venture Corporation has benefited from the increase in demand for electronics products/services. This has allowed the company to more than double its net profit during that period. From 2008 to 2017, net profit attributable to shareholders grew from S$166.7 million in 2008 to S$372.8 million in 2017, up by 124%. Revenue, on the other hand, grew at a slower pace from S$ 3.8 billion in 2008 to S$4.0 billion in 2017.
Recently, however, Venture Corporation is facing some challenges in its business performance. In its latest quarterly result (for the period ended 30 September 2018), Venture Corporation saw its revenue and profit attributable to shareholder plunged by 27.4% and 27.5%, respectively. The reason given is due to the “impact arising from customers’ planned transition to new replacement products and some customers’ M&A activities for the reported quarter.”
From the above, we can see that though Venture Corporation has been able to grow over the longer term, its short term business activities can be volatile. This is something that investors should note when studying this company.
There you go, three blue chip companies that have more than doubled their profitability over the decade. Though there is no guarantee that these companies can continue to deliver such performance in the next decade, investors might still want to look into these companies given their past track records.
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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. Motley Fool has recommendations for DBS Group Holdings Ltd.