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Examining how Lonking Holdings Limited (HKG:3339) is performing as a company requires looking at more than just a years' earnings. Below, I will run you through a simple sense check to build perspective on how Lonking Holdings is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its machinery industry peers.
Could 3339 beat the long-term trend and outperform its industry?
3339's trailing twelve-month earnings (from 31 December 2018) of CN¥1.1b has increased by 9.4% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 31%, indicating the rate at which 3339 is growing has slowed down. To understand what's happening, let's examine what's going on with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Lonking Holdings has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 7.5% exceeds the HK Machinery industry of 5.3%, indicating Lonking Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Lonking Holdings’s debt level, has increased over the past 3 years from 3.0% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 62% to 16% over the past 5 years.
What does this mean?
Lonking Holdings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Lonking Holdings has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Lonking Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3339’s future growth? Take a look at our free research report of analyst consensus for 3339’s outlook.
- Financial Health: Are 3339’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 December 2018. 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 firstname.lastname@example.org. 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.