With A -84.70% Earnings Drop, Is Huisheng International Holdings Limited’s (HKG:1340) Performance A Concern?
Investors with a long-term horizong may find it valuable to assess Huisheng International Holdings Limited’s (SEHK:1340) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Huisheng International Holdings is currently performing. See our latest analysis for Huisheng International Holdings
Commentary On 1340’s Past Performance
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze various companies on a more comparable basis, using the latest information. For Huisheng International Holdings, its most recent trailing-twelve-month earnings is CN¥18.4M, which, against the prior year’s level, has taken a dive by a non-trivial -84.70%. Since these values are somewhat short-term, I’ve determined an annualized five-year value for Huisheng International Holdings’s earnings, which stands at CN¥97.0M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been declining over the longer term.
Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the entire industry is feeling the heat. Revenue growth in the last few years, has been positive, yet earnings growth has been declining. This suggest that Huisheng International Holdings has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the HK food industry has been growing its average earnings by double-digit 10.87% in the previous year, and a more muted 9.12% over the previous five years. This suggests that any uplift the industry is benefiting from, Huisheng International Holdings has not been able to reap as much as its industry peers.
What does this mean?
Though Huisheng International Holdings’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that endure an extended period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. I suggest you continue to research Huisheng International Holdings to get a better picture of the stock by looking at:
1. Financial Health: Is 1340’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.
2. 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 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.
