Today I will examine Liu Chong Hing Investment Limited's (HKG:194) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of 194's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
How Did 194's Recent Performance Stack Up Against Its Past?
194's trailing twelve-month earnings (from 30 June 2019) of HK$909m has increased by 9.6% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 24%, indicating the rate at which 194 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Liu Chong Hing Investment has fallen short of achieving a 20% return on equity (ROE), recording 7.6% instead. However, its return on assets (ROA) of 6.3% exceeds the HK Real Estate industry of 2.9%, indicating Liu Chong Hing Investment has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Liu Chong Hing Investment’s debt level, has increased over the past 3 years from 3.5% to 6.6%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 24% to 11% over the past 5 years.
What does this mean?
Though Liu Chong Hing Investment's past data is helpful, it is only one aspect of my investment thesis. While Liu Chong Hing Investment has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research Liu Chong Hing Investment to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 194’s future growth? Take a look at our free research report of analyst consensus for 194’s outlook.
- Financial Health: Are 194’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 2019. 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.