Venture Corporation Ltd (SGX: V03) is an electronics manufacturing services provider with expertise in a wide range of activities. Since reaching its peak in 2018, Venture’s share price has declined about 50% in the following months. Nevertheless, there are many things to like about the company. I’ll take a look at two of those in this article.
Solid financial track record
As investors, we need to keep our eyes focused on those factors that matter in the long run. One of those factors is the financial performance of the underlying business.
The reason is simple. A popular market saying goes that “In the short run, the stock market is a voting machine. Yet in the long run, it’s a weighing machine.” At the end of the day, the stock price performance will correlate to a business’s performance.
And that brings us to our main point here – Venture has a solid financial track record, despite operating in a volatile industry. In the last five years, it has grown its revenue from S$2.5 billion in 2014 to S$3.5 billion in 2018. Similarly, net profit grew from S$139.8 million to S$370.1 million during that period.
Though past results are no guarantee of future performance, it gives investors some assurance that the company must have been doing some things right to deliver such results.
Strength of the balance sheet
There are many good reasons to invest in a company with a strong balance sheet. For one, it will allow the company to sustain, as well as grow, its business over time with low risk. Also, dividends are paid out to investors in the form of cash. Thus, a company must have enough cash in the till or at least have the ability to borrow money (if necessary) to pay its dividend.
In short, it makes a lot of sense to invest in a company with a strong balance sheet. To gauge the strength of a company’s balance sheet, the net-debt to shareholder’s equity ratio can be used (net-debt refers to total borrowings and capital leases net of cash and short-term investments). A ratio of over 100% would mean that a company’s net-debt outweighs its shareholder’s equity.
And now for Venture. A quick glance into its latest financial position (31 March 2019) shows that Venture has S$805.2 million in cash (net of debt). Such numbers indicate that the company has a solid balance sheet strength.
Overall, I think Venture is a company with desirable qualities – two of which are a strong track record and a solid balance sheet. Thus, the recent decline in its share price provides a good opportunity for investors to consider its stock.
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.