With A -11% Earnings Drop, Did Shanghai Jin Jiang Capital Company Limited (HKG:2006) Really Underperform?
Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Shanghai Jin Jiang Capital Company Limited's (SEHK:2006) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
See our latest analysis for Shanghai Jin Jiang Capital
Commentary On 2006's Past Performance
2006's trailing twelve-month earnings (from 31 December 2019) of CN¥676m has declined by -11% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -1.8%, indicating the rate at which 2006 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Shanghai Jin Jiang Capital has fallen short of achieving a 20% return on equity (ROE), recording 8.4% instead. Furthermore, its return on assets (ROA) of 2.6% is below the HK Hospitality industry of 4.1%, indicating Shanghai Jin Jiang Capital's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Shanghai Jin Jiang Capital’s debt level, has increased over the past 3 years from 2.9% to 6.0%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes Shanghai Jin Jiang Capital and its peers a riskier investment. You should continue to research Shanghai Jin Jiang Capital to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 2006’s future growth? Take a look at our free research report of analyst consensus for 2006’s outlook.
Financial Health: Are 2006’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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