When International Housewares Retail Company Limited (SEHK:1373) announced its most recent earnings (31 October 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well International Housewares Retail has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see 1373 has performed.
Did 1373 beat its long-term earnings growth trend and its industry?
1373's trailing twelve-month earnings (from 31 October 2019) of HK$118m has increased by 3.6% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 8.6%, indicating the rate at which 1373 is growing has slowed down. What could be happening here? Well, let's look at what's occurring with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, International Housewares Retail has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 7.6% exceeds the HK Specialty Retail industry of 5.5%, indicating International Housewares Retail has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for International Housewares Retail’s debt level, has increased over the past 3 years from 14% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 9.3% to 4.0% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research International Housewares Retail to get a more holistic view of the stock by looking at:
- Financial Health: Are 1373’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.
- Valuation: What is 1373 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 1373 is currently mispriced by the market.
- 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 October 2019. This may not be consistent with full year annual report figures.
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.
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