For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at China Flavors and Fragrances Company Limited's (HKG:3318) 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.
How Well Did 3318 Perform?
3318's trailing twelve-month earnings (from 31 December 2018) of CN¥127m has declined by -2.0% 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 15%, indicating the rate at which 3318 is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, China Flavors and Fragrances has fallen short of achieving a 20% return on equity (ROE), recording 5.5% instead. Furthermore, its return on assets (ROA) of 4.5% is below the HK Chemicals industry of 7.0%, indicating China Flavors and Fragrances's are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Flavors and Fragrances’s debt level, has increased over the past 3 years from 5.2% to 6.2%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research China Flavors and Fragrances to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3318’s future growth? Take a look at our free research report of analyst consensus for 3318’s outlook.
- Financial Health: Are 3318’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 email@example.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.