When Chow Tai Fook Jewellery Group Limited (SEHK:1929) released its most recent earnings update (30 September 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Chow Tai Fook Jewellery Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 1929 has performed.
How Did 1929's Recent Performance Stack Up Against Its Past?
1929's trailing twelve-month earnings (from 30 September 2019) of HK$4.2b has declined by -1.9% 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 -4.4%, indicating the rate at which 1929 is growing has slowed down. Why is this? Well, let's look at what's transpiring with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Chow Tai Fook Jewellery Group has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.0% exceeds the HK Specialty Retail industry of 6.2%, indicating Chow Tai Fook Jewellery Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Chow Tai Fook Jewellery Group’s debt level, has increased over the past 3 years from 11% to 20%.
What does this mean?
Chow Tai Fook Jewellery Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Usually companies that endure a drawn out period of decline in earnings are undergoing some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes Chow Tai Fook Jewellery Group and its peers a riskier investment. I recommend you continue to research Chow Tai Fook Jewellery Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1929’s future growth? Take a look at our free research report of analyst consensus for 1929’s outlook.
- Financial Health: Are 1929’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 30 September 2019. This may not be consistent with full year annual report figures.
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