Understanding how Asia Financial Holdings Limited (SEHK:662) is performing as a company requires looking at more than just a years' earnings. Today I will run you through a basic sense check to gain perspective on how Asia Financial Holdings is doing by comparing its latest earnings with its long-term trend as well as the performance of its insurance industry peers.
Did 662 beat its long-term earnings growth trend and its industry?
662's trailing twelve-month earnings (from 30 June 2019) of HK$390m has jumped 21% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.8%, indicating the rate at which 662 is growing has accelerated. How has it been able to do this? Let's see whether it is only owing to industry tailwinds, or if Asia Financial Holdings has experienced some company-specific growth.
In terms of returns from investment, Asia Financial Holdings has fallen short of achieving a 20% return on equity (ROE), recording 4.1% instead. However, its return on assets (ROA) of 2.9% exceeds the HK Insurance industry of 1.9%, indicating Asia Financial Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Asia Financial Holdings’s debt level, has increased over the past 3 years from 0.8% to 2.1%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 2.7% to 1.6% over the past 5 years.
What does this mean?
Though Asia Financial Holdings's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Asia Financial Holdings to get a more holistic view of the stock by looking at:
- Financial Health: Are 662’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 662 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 662 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 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.
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