Vicom Limited’s Stock Is Down 6.6% Over The Last 12 Months: Here’s Why
Vicom Limited (SGX: V01) is a leading provider of vehicle testing and inspection services in Singapore. It also provides technical testing and inspection services for a wide variety of industries. The company is a subsidiary of land transport giant ComfortDelGro Corporation Ltd (SGX: C52).
Over the last 12 months, Vicom’s stock price has declined by 6.6%. What may have caused this?
Reasons for a decline
There can be many reasons behind a stock’s price decline.
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 Vicom
In Vicom’s case, I believe it’s the former at work. Here’s a summarised version of Vicom’s income statement for 2016 and 2015:
Source: Vicom’s website
We can see that the company’s revenue and earnings per share had declined by 5.2% and 10.4%, respectively, in 2016. Lower number of vehicle inspections performed due to a record high number of vehicle deregistrations had been a big reason for Vicom’s weaker business results.
For me, this is a clear sign that Vicom’s lower stock price is linked to its business’s performance. Unless there’s a change in how Vicom’s business does, it is unlikely that its stock price will see any major turnaround.