After a several month hiatus I have managed to start posting company scores again. This is because my efforts have been more focused on the volatility we have been experiencing recently, where making money has been more about market timing rather than balance sheet analysis.
Anyway, in case you are not aware of this counter, it has shot up lately as it is growth company set to ride what I call the second wave of the commodity boom (i.e. commodity processing as opposed to producing). Generally speaking, the market is pricing in the theory that companies along the supply chain should be next to benefit from rising commodity demand as commodities are processed for consumption. Palm oil millers and feed processors, for example, are seen to be less exposed to commodity prices, but still benefit from rising commodity demand.
QL resources has both, and a strong balance sheet to boot. As you can see, it is a rapidly growing company benefiting from rising profit margins.
But is it a good buy?
Although it scores a worthy 9 on my scoresheet, its important to notice that revenue growth has actually slowed compared to its profit margin, and it is already trading at a relatively high PE. Another thing to watch out for is its effective tax rate, which is abysmally low. This sets alarm bells ringing because you have to wonder how real a company’s profits are if the taxman is happy to only collect 11% of it.
Happy trading!
No comments yet.