When Tang Palace (China) Holdings Limited (SEHK:1181) released its most recent earnings update (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Tang Palace (China) Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 1181 has performed.
Commentary On 1181's Past Performance
1181's trailing twelve-month earnings (from 30 June 2019) of CN¥114m has declined by -6.1% 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 21%, indicating the rate at which 1181 is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Tang Palace (China) Holdings has invested its equity funds well leading to a 27% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 10% exceeds the HK Hospitality industry of 4.7%, indicating Tang Palace (China) Holdings has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Tang Palace (China) Holdings’s debt level, has declined over the past 3 years from 41% to 40%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.06% to 18% over the past 5 years.
What does this mean?
Tang Palace (China) Holdings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I recommend you continue to research Tang Palace (China) Holdings to get a more holistic view of the stock by looking at:
- Financial Health: Are 1181’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.
- Valuation: What is 1181 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1181 is currently mispriced by the market.
- 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.
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.
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.