For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Fuwei Films (Holdings) Co Ltd.’s (NASDAQ:FFHL) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. See our latest analysis for Fuwei Films (Holdings)
Were FFHL’s earnings stronger than its past performances and the industry?
I prefer to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to examine different companies on a similar basis, using the most relevant data points. For Fuwei Films (Holdings), its latest trailing-twelve-month earnings is -CN¥54.68M, which compared to last year’s figure, has become less negative. Since these values may be fairly short-term, I have estimated an annualized five-year value for FFHL’s net income, which stands at -CN¥45.32M. This means that, Fuwei Films (Holdings) has historically performed better than recently, although it seems like earnings are now heading back towards a more favorable position once more.
We can further analyze Fuwei Films (Holdings)’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Fuwei Films (Holdings) has seen an annual decline in revenue of -14.03%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 15.23% over the previous year, and a more subdued 5.94% over the last five years. This means that any tailwind the industry is enjoying, Fuwei Films (Holdings) has not been able to reap as much as its average peer.
What does this mean?
Though Fuwei Films (Holdings)’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues Fuwei Films (Holdings) may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Fuwei Films (Holdings) to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is FFHL’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.
- 2. 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 September 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.