Today I will take a look at Man Wah Holdings Limited's (SEHK:1999) most recent earnings update (30 September 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the consumer durables industry performed. As an investor, I find it beneficial to assess 1999’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.
Did 1999 perform better than its track record and industry?
1999's trailing twelve-month earnings (from 30 September 2019) of HK$1.4b has declined by -0.3% 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 5.7%, indicating the rate at which 1999 is growing has slowed down. Why is this? Well, let's look at what's going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Man Wah Holdings has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the HK Consumer Durables industry of 4.6%, indicating Man Wah Holdings has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Man Wah Holdings’s debt level, has declined over the past 3 years from 31% to 20%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 19% to 61% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Man Wah Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1999’s future growth? Take a look at our free research report of analyst consensus for 1999’s outlook.
- Financial Health: Are 1999’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 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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