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Poly Culture Group Corporation Limited (HKG:3636): Does The -15% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

Assessing Poly Culture Group Corporation Limited's (HKG:3636) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess 3636's recent performance announced on 30 June 2019 and evaluate these figures to its long-term trend and industry movements.

See our latest analysis for Poly Culture Group

How Well Did 3636 Perform?

3636's trailing twelve-month earnings (from 30 June 2019) of CN¥224m has declined by -15% 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 -0.3%, indicating the rate at which 3636 is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and if the rest of the industry is feeling the heat.

SEHK:3636 Income Statement, August 27th 2019

In terms of returns from investment, Poly Culture Group has fallen short of achieving a 20% return on equity (ROE), recording 6.6% instead. Furthermore, its return on assets (ROA) of 1.9% is below the HK Entertainment industry of 5.2%, indicating Poly Culture Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Poly Culture Group’s debt level, has declined over the past 3 years from 10.0% to 6.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 15% to 76% over the past 5 years.

What does this mean?

Poly Culture Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Usually companies that endure a prolonged period of decline in earnings are undergoing some sort of reinvestment phase Though if the whole industry is struggling to grow over time, it may be a sign of a structural change, which makes Poly Culture Group and its peers a riskier investment. You should continue to research Poly Culture Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 3636’s future growth? Take a look at our free research report of analyst consensus for 3636’s outlook.
  2. Financial Health: Are 3636’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.