When Jupai Holdings Limited (NYSE:JP) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Jupai Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see JP has performed.
Could JP beat the long-term trend and outperform its industry?
JP’s trailing twelve-month earnings (from 31 March 2018) of CN¥434.7m has jumped 59.9% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 52.1%, indicating the rate at which JP is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is solely due to an industry uplift, or if Jupai Holdings has seen some company-specific growth.
In the last few years, Jupai Holdings increased its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time.
Viewing growth from a sector-level, the US capital markets industry has been growing its average earnings by double-digit 21.3% in the prior year, and 14.5% over the previous five years. This growth is a median of profitable companies of 25 Capital Markets companies in US including Caledonia Investments, Donnelley Financial Solutions and BGC Partners. This suggests that any tailwind the industry is enjoying, Jupai Holdings is capable of amplifying this to its advantage.
In terms of returns from investment, Jupai Holdings has invested its equity funds well leading to a 23.9% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 16.0% exceeds the US Capital Markets industry of 3.2%, indicating Jupai Holdings has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Jupai Holdings’s debt level, has declined over the past 3 years from 42.6% to 30.2%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Jupai Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Jupai Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for JP’s future growth? Take a look at our free research report of analyst consensus for JP’s outlook.
- Financial Health: Are JP’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 31 March 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 firstname.lastname@example.org.