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China Dongxiang (Group) Co., Ltd.'s (HKG:3818) Earnings Dropped -11%, Did Its Industry Show Weakness Too?

Simply Wall St

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Assessing China Dongxiang (Group) Co., Ltd.'s (HKG:3818) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess 3818's latest performance announced on 31 March 2019 and evaluate these figures to its historical trend and industry movements.

View our latest analysis for China Dongxiang (Group)

Despite a decline, did 3818 underperform the long-term trend and the industry?

3818's trailing twelve-month earnings (from 31 March 2019) of CN¥693m has declined by -11% 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 0.8%, indicating the rate at which 3818 is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and if the entire industry is feeling the heat.

SEHK:3818 Income Statement, July 9th 2019

In terms of returns from investment, China Dongxiang (Group) has fallen short of achieving a 20% return on equity (ROE), recording 6.7% instead. Furthermore, its return on assets (ROA) of 3.7% is below the HK Luxury industry of 5.8%, indicating China Dongxiang (Group)'s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Dongxiang (Group)’s debt level, has increased over the past 3 years from 1.5% to 5.2%.

What does this mean?

Though China Dongxiang (Group)'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 affecting its business. You should continue to research China Dongxiang (Group) to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 3818’s future growth? Take a look at our free research report of analyst consensus for 3818’s outlook.
  2. Financial Health: Are 3818’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 31 March 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.