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Tonking New Energy Group Holdings Limited (HKG:8326): Does The -19% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

Examining Tonking New Energy Group Holdings Limited's (HKG:8326) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 8326's latest performance announced on 31 March 2019 and weight these figures against its longer term trend and industry movements.

View our latest analysis for Tonking New Energy Group Holdings

Commentary On 8326's Past Performance

8326's trailing twelve-month earnings (from 31 March 2019) of HK$23m has declined by -19% 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 37%, indicating the rate at which 8326 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.

SEHK:8326 Income Statement, July 25th 2019

In terms of returns from investment, Tonking New Energy Group Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 5.7% exceeds the HK Hospitality industry of 4.4%, indicating Tonking New Energy Group Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Tonking New Energy Group Holdings’s debt level, has increased over the past 3 years from 9.5% to 17%.

What does this mean?

Though Tonking New Energy Group Holdings's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I suggest you continue to research Tonking New Energy Group Holdings to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 8326’s future growth? Take a look at our free research report of analyst consensus for 8326’s outlook.
  2. Financial Health: Are 8326’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 31 March 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.