Does Sinopharm Group Co Ltd.’s (HKG:1099) Past Performance Indicate A Stronger Future?
After looking at Sinopharm Group Co Ltd.’s (SEHK:1099) latest earnings update (30 June 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. View our latest analysis for Sinopharm Group
How 1099 fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I 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 blend allows me to assess different companies on a more comparable basis, using the most relevant data points. For Sinopharm Group, its latest earnings (trailing twelve month) is CN¥4.86B, which, in comparison to the prior year’s figure, has moved up by 10.63%. Since these figures are somewhat short-term, I’ve computed an annualized five-year value for 1099’s net income, which stands at CN¥2.81B This means generally, Sinopharm Group has been able to consistently improve its earnings over the last few years as well.
What’s the driver of this growth? Let’s see whether it is merely attributable to industry tailwinds, or if Sinopharm Group has seen some company-specific growth. In the last couple of years, Sinopharm Group grew its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the HK healthcare industry has been growing its average earnings by double-digit 19.67% in the prior twelve months, and a more muted 7.16% over the last five years. This means that whatever tailwind the industry is profiting from, Sinopharm Group has not been able to realize the gains unlike its industry peers.
What does this mean?
Sinopharm Group’s track record can be a valuable insight into its earnings performance, but it certainly 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? You should continue to research Sinopharm Group to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for 1099’s future growth? Take a look at our free research report of analyst consensus for 1099’s outlook.
2. Financial Health: Is 1099’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 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.
