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Does Shanghai Industrial Holdings Limited's (HKG:363) -4.0% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

After looking at Shanghai Industrial Holdings Limited's (SEHK:363) latest earnings announcement (30 June 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. 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 a crucial aspect. Below is a brief commentary on my key takeaways.

Check out our latest analysis for Shanghai Industrial Holdings

How Well Did 363 Perform?

363's trailing twelve-month earnings (from 30 June 2019) of HK$3.4b has declined by -4.0% 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 4.2%, indicating the rate at which 363 is growing has slowed down. Why could this be happening? Let's examine what's transpiring with margins and if the rest of the industry is feeling the heat.

SEHK:363 Income Statement, December 4th 2019

In terms of returns from investment, Shanghai Industrial Holdings has fallen short of achieving a 20% return on equity (ROE), recording 7.6% instead. Furthermore, its return on assets (ROA) of 2.8% is below the HK Industrials industry of 4.3%, indicating Shanghai Industrial Holdings's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Shanghai Industrial Holdings’s debt level, has increased over the past 3 years from 5.3% to 6.7%.

What does this mean?

Shanghai Industrial Holdings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Shanghai Industrial Holdings to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 363’s future growth? Take a look at our free research report of analyst consensus for 363’s outlook.
  2. Financial Health: Are 363’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 30 June 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 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.

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. Thank you for reading.