Foolish Face-Off: Venture Corporation Ltd Versus Valuetronics Holdings Limited
There are around 700 companies listed on the stock exchange in Singapore. Of those, there are a number of them that have similar business operations. It is sometimes difficult to determine which company in a particular industry is better than its peers.
In this article, we will make some quick-and-dirty comparisons between two electronics manufacturing services companies, Venture Corporation Ltd (SGX: V03) and Valuetronics Holdings Limited (SGX: BN2), to determine which might give you more bang for your buck.
Introducing the Contenders
Founded in 1984 and headquartered in Singapore, Venture Corporation is a global electronics services provider that can support design, manufacturing, and e-fulfilment for high-mix, high-value and sophisticated products. The firm has grown significantly since its humble beginnings, and today employs more than 12,000 people across Southeast Asia, North Asia, America, and Europe. Venture lately became a Straits Times Index (SGX: ^STI) component.
Valuetronics Holdings Limited, on the other hand, was started in 1992 and offers a combination of design, engineering, manufacturing, and supply chain support services for electronic and electro-mechanical products. The company’s headquarters is located in Hong Kong.
The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as of the closing prices on 10 January 2018.
Do note that all figures quoted in the tables that follow are for the financial year ended 31 December 2016 (FY2016) for Venture Corporation and for the financial year ended 31 March 2017 (FY2017) for Valuetronics Holdings, unless otherwise stated.
Round 1: Profitability
In the first round, we will analyse the profitability of the companies in terms of net margin and Return on Equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.
For every dollar of revenue created by Venture, around six cents were generated as profits, but for Valuetronics, every dollar of turnover gave almost seven cents in profits. This shows that Valuetronics is slightly more profitable than its counterpart. Furthermore, Valuetronics has a much higher ROE than Venture.
Round 2: Growth
In the second round, we will compare the compounded annual growth rate (CAGR) of revenue, net profit and dividend of the two firms for the past five financial years. Businesses that can grow their sales and profits steadily over time should also see their share price rise.
Valuetronics has trounced Venture in all aspects, except for revenue growth. Venture’s dividend growth rate is 0% as it has maintained a dividend of 50 cents per share since FY2012.
Round 3: Valuation
As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price.
We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two companies. The values below are as of the closing prices on 10 January 2018.
Valuetronics has a lower PE and PS ratio than Venture. It also has a slightly higher dividend yield than its peer.
The Foolish Bottom Line
Final Score: 3-0 to Valuetronics, as it has triumphed over Venture in all the rounds.
However, we have yet to look at other important aspects of the companies such as the balance sheet strength, free cash flow situation, management’s integrity, and so on. Potential investors interested in Valuetronics should research more on the company before investing their money. This simple exercise would help to take some heavy-lifting off your back though.