Assessing Flat Glass Group Co Ltd’s (HKG:6865) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess 6865’s latest performance announced on 30 June 2018 and evaluate these figures to its historical trend and industry movements.
Was 6865’s weak performance lately a part of a long-term decline?
6865’s trailing twelve-month earnings (from 30 June 2018) of CN¥437.27m has declined by -9.33% 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 14.92%, indicating the rate at which 6865 is growing has slowed down. Why could this be happening? Let’s examine what’s going on with margins and whether the whole industry is feeling the heat.
In the last couple of years, revenue growth has fallen behind which implies that Flat Glass Group’s bottom line has been propelled by unmaintainable cost-reductions. Looking at growth from a sector-level, the HK semiconductor industry has been relatively flat in terms of earnings growth over the previous twelve months, levelling off from a solid 10.37% over the past half a decade. This growth is a median of profitable companies of 19 Semiconductor companies in HK including Risecomm Group Holdings, BOE Varitronix and Semiconductor Manufacturing International. This means that whatever near-term headwind the industry is experiencing, it’s hitting Flat Glass Group harder than its peers.
In terms of returns from investment, Flat Glass Group has fallen short of achieving a 20% return on equity (ROE), recording 12.62% instead. However, its return on assets (ROA) of 6.68% exceeds the HK Semiconductor industry of 5.73%, indicating Flat Glass Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Flat Glass Group’s debt level, has declined over the past 3 years from 21.09% to 10.63%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that face a drawn out period of diminishing earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Flat Glass Group and its peers a higher risk investment. I recommend you continue to research Flat Glass Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 6865’s future growth? Take a look at our free research report of analyst consensus for 6865’s outlook.
- Financial Health: Are 6865’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.
- 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 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.