With A -8.7% Earnings Drop, Did Goodbaby International Holdings Limited (HKG:1086) Really Underperform?
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Analyzing Goodbaby International Holdings Limited's (HKG:1086) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess 1086's recent performance announced on 31 December 2018 and compare these figures to its long-term trend and industry movements.
Check out our latest analysis for Goodbaby International Holdings
How Did 1086's Recent Performance Stack Up Against Its Past?
1086's trailing twelve-month earnings (from 31 December 2018) of HK$164m has declined by -8.7% 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 9.8%, indicating the rate at which 1086 is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, Goodbaby International Holdings has fallen short of achieving a 20% return on equity (ROE), recording 3.4% instead. Furthermore, its return on assets (ROA) of 2.7% is below the HK Leisure industry of 7.9%, indicating Goodbaby International Holdings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Goodbaby International Holdings’s debt level, has declined over the past 3 years from 6.1% to 3.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 22% to 56% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a sign of a structural shift, which makes Goodbaby International Holdings and its peers a higher risk investment. I suggest you continue to research Goodbaby International Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1086’s future growth? Take a look at our free research report of analyst consensus for 1086’s outlook.
Financial Health: Are 1086’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 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.
