Should You Be Content With Synertone Communication Corporation’s (HKG:1613) Earnings Growth?
After looking at Synertone Communication Corporation’s (SEHK:1613) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for Synertone Communication
Did 1613 beat its long-term earnings growth trend and its industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to examine different stocks on a similar basis, using the latest information. For Synertone Communication, its most recent earnings (trailing twelve month) is -HK$199.30M, which, relative to last year’s figure, has become less negative. Since these figures are fairly short-term, I have calculated an annualized five-year figure for Synertone Communication’s earnings, which stands at -HK$84.74M. This means that, Synertone Communication has historically performed better than recently, while it seems like earnings are now heading back towards a more favorable position once more.
We can further evaluate Synertone Communication’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Synertone Communication has seen an annual decline in revenue of -6.60%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the HK communications industry has been growing its average earnings by double-digit 38.28% over the past twelve months, and a flatter -0.58% over the last five years. This means although Synertone Communication is currently loss-making, it may have only just gained from the recent industry expansion, moving earnings into a more favorable position.
What does this mean?
Synertone Communication’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will occur going forward, and when. The most useful step is to assess company-specific issues Synertone Communication may be facing and whether management guidance has steadily been met in the past. You should continue to research Synertone Communication to get a better picture of the stock by looking at:
1. Financial Health: Is 1613’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. Valuation: What is 1613 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1613 is currently mispriced by the market.
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 30 September 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.
