When UMP Healthcare Holdings Limited (HKG:722) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well UMP Healthcare Holdings has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see 722 has performed.
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Was 722 weak performance lately part of a long-term decline?
722’s trailing twelve-month earnings (from 30 June 2018) of HK$38m has declined by -15% 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 6.8%, indicating the rate at which 722 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, UMP Healthcare Holdings has fallen short of achieving a 20% return on equity (ROE), recording 5.9% instead. However, its return on assets (ROA) of 4.4% exceeds the HK Healthcare industry of 4.1%, indicating UMP Healthcare Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for UMP Healthcare Holdings’s debt level, has declined over the past 3 years from 56% to 5.9%.
What does this mean?
Though UMP Healthcare Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research UMP Healthcare Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 722’s future growth? Take a look at our free research report of analyst consensus for 722’s outlook.
- Financial Health: Are 722’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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.