For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Sun Hung Kai Properties Limited (SEHK:16) useful as an attempt to give more color around how Sun Hung Kai Properties is currently performing.
Did 16's recent earnings growth beat the long-term trend and the industry?
16's trailing twelve-month earnings (from 31 December 2019) of HK$40b has increased by 6.6% 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 8.6%, indicating the rate at which 16 is growing has slowed down. To understand what's happening, let's look at what's occurring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Sun Hung Kai Properties has fallen short of achieving a 20% return on equity (ROE), recording 7.1% instead. However, its return on assets (ROA) of 5.2% exceeds the HK Real Estate industry of 2.9%, indicating Sun Hung Kai Properties has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sun Hung Kai Properties’s debt level, has declined over the past 3 years from 6.1% to 5.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 19% to 23% over the past 5 years.
What does this mean?
Though Sun Hung Kai Properties's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Sun Hung Kai Properties gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Sun Hung Kai Properties to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 16’s future growth? Take a look at our free research report of analyst consensus for 16’s outlook.
- Financial Health: Are 16’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 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.
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. Thank you for reading.