Does TK Group (Holdings) Limited's (HKG:2283) -2.4% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

Examining TK Group (Holdings) Limited's (SEHK:2283) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 2283's latest performance announced on 30 June 2019 and weigh these figures against its longer term trend and industry movements.

See our latest analysis for TK Group (Holdings)

How Did 2283's Recent Performance Stack Up Against Its Past?

2283's trailing twelve-month earnings (from 30 June 2019) of HK$324m has declined by -2.4% 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 20%, indicating the rate at which 2283 is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and whether the entire industry is experiencing the hit as well.

SEHK:2283 Income Statement, October 21st 2019

In terms of returns from investment, TK Group (Holdings) has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the HK Machinery industry of 5.5%, indicating TK Group (Holdings) has used its assets more efficiently. However, its return on capital (ROC), which also accounts for TK Group (Holdings)’s debt level, has declined over the past 3 years from 31% to 23%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 30% to 52% over the past 5 years.

What does this mean?

TK Group (Holdings)'s track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I suggest you continue to research TK Group (Holdings) to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 2283’s future growth? Take a look at our free research report of analyst consensus for 2283’s outlook.
  2. Financial Health: Are 2283’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.
  3. 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 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.