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How Does Stella International Holdings Limited's (HKG:1836) Earnings Growth Stack Up Against Industry Performance?

Simply Wall St

In this commentary, I will examine Stella International Holdings Limited's (HKG:1836) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the luxury industry performed. As an investor, I find it beneficial to assess 1836’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

Check out our latest analysis for Stella International Holdings

Were 1836's earnings stronger than its past performances and the industry?

1836's trailing twelve-month earnings (from 30 June 2019) of US$81m has jumped 44% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -16%, indicating the rate at which 1836 is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is merely because of industry tailwinds, or if Stella International Holdings has experienced some company-specific growth.

SEHK:1836 Income Statement, September 9th 2019

In terms of returns from investment, Stella International Holdings has fallen short of achieving a 20% return on equity (ROE), recording 8.4% instead. However, its return on assets (ROA) of 6.6% exceeds the HK Luxury industry of 5.7%, indicating Stella International Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Stella International Holdings’s debt level, has declined over the past 3 years from 9.0% to 6.5%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 12% to 15% over the past 5 years.

What does this mean?

Stella International Holdings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Recent positive growth isn't always indicative of a continued optimistic outlook. I suggest you continue to research Stella International Holdings to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 1836’s future growth? Take a look at our free research report of analyst consensus for 1836’s outlook.
  2. Financial Health: Are 1836’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.

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.

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. Thank you for reading.