Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Examining China Mengniu Dairy Company Limited's (HKG:2319) 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 2319's latest performance announced on 31 December 2018 and weigh these figures against its longer term trend and industry movements.
Could 2319 beat the long-term trend and outperform its industry?
2319's trailing twelve-month earnings (from 31 December 2018) of CN¥3.0b has jumped 49% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.5%, indicating the rate at which 2319 is growing has accelerated. How has it been able to do this? Let's take a look at if it is solely a result of an industry uplift, or if China Mengniu Dairy has experienced some company-specific growth.
In terms of returns from investment, China Mengniu Dairy has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.1% is below the HK Food industry of 5.5%, indicating China Mengniu Dairy's are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Mengniu Dairy’s debt level, has increased over the past 3 years from 6.5% to 8.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 66% to 48% over the past 5 years.
What does this mean?
Though China Mengniu Dairy's past data is helpful, it is only one aspect of my investment thesis. While China Mengniu Dairy 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 China Mengniu Dairy to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 2319’s future growth? Take a look at our free research report of analyst consensus for 2319’s outlook.
- Financial Health: Are 2319’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 December 2018. 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.