Examining how Sino Land Company Limited (SEHK:83) 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 Sino Land is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its real estate industry peers.
Was 83's recent earnings decline indicative of a tough track record?
83's trailing twelve-month earnings (from 31 December 2019) of HK$6.6b has declined by -2.9% 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 -0.1%, indicating the rate at which 83 is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Sino Land has fallen short of achieving a 20% return on equity (ROE), recording 4.5% instead. However, its return on assets (ROA) of 3.1% exceeds the HK Real Estate industry of 2.9%, indicating Sino Land has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sino Land’s debt level, has declined over the past 3 years from 3.8% to 2.0%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a signal of a structural change, which makes Sino Land and its peers a riskier investment. I suggest you continue to research Sino Land to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 83’s future growth? Take a look at our free research report of analyst consensus for 83’s outlook.
- Financial Health: Are 83’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 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 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.
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