With A -15% Earnings Drop, Did Grand Ming Group Holdings Limited (HKG:1271) Really Underperform?
When Grand Ming Group Holdings Limited’s (HKG:1271) announced its latest earnings (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Grand Ming Group Holdings’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 1271 actually performed well. Below is a quick commentary on how I see 1271 has performed.
See our latest analysis for Grand Ming Group Holdings
Was 1271 weak performance lately part of a long-term decline?
1271’s trailing twelve-month earnings (from 31 March 2018) of HK$172m 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 -8.5%, indicating the rate at which 1271 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Grand Ming Group Holdings has fallen short of achieving a 20% return on equity (ROE), recording 6.2% instead. Furthermore, its return on assets (ROA) of 2.7% is below the HK Construction industry of 5.8%, indicating Grand Ming Group Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Grand Ming Group Holdings’s debt level, has declined over the past 3 years from 4.6% to 3.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 67% to 130% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that endure a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Grand Ming Group Holdings and its peers a riskier investment. You should continue to research Grand Ming Group Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1271’s future growth? Take a look at our free research report of analyst consensus for 1271’s outlook.
Financial Health: Are 1271’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 March 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 editorial-team@simplywallst.com.
