Examining China Dongxiang (Group) Co Ltd’s (HKG:3818) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess 3818’s latest performance announced on 30 June 2018 and compare these figures to its longer term trend and industry movements.
Was 3818’s weak performance lately a part of a long-term decline?
3818’s trailing twelve-month earnings (from 30 June 2018) of CN¥750m 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 19%, indicating the rate at which 3818 is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, China Dongxiang (Group) has fallen short of achieving a 20% return on equity (ROE), recording 7.4% instead. Furthermore, its return on assets (ROA) of 4.9% is below the HK Luxury industry of 6.1%, indicating China Dongxiang (Group)’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Dongxiang (Group)’s debt level, has increased over the past 3 years from 5.4% to 6.7%.
What does this mean?
Though China Dongxiang (Group)’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 affecting its business. I suggest you continue to research China Dongxiang (Group) to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3818’s future growth? Take a look at our free research report of analyst consensus for 3818’s outlook.
- Financial Health: Are 3818’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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.