Measuring Yue Yuen Industrial (Holdings) Limited’s (HKG:551) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess 551’s recent performance announced on 30 June 2018 and weigh these figures against its long-term trend and industry movements.
How Did 551’s Recent Performance Stack Up Against Its Past?
551’s trailing twelve-month earnings (from 30 June 2018) of US$410.8m has declined by -24.5% 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 1.0%, indicating the rate at which 551 is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and if the entire industry is experiencing the hit as well.
Revenue growth over the past few years, has been positive, however, earnings growth has fallen behind meaning Yue Yuen Industrial (Holdings) has been growing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the HK luxury industry has been growing, albeit, at a muted single-digit rate of 5.6% over the prior year, . This is a turnaround from a volatile drop of -2.9% in the previous few years. This growth is a median of profitable companies of 24 Luxury companies in HK including China Partytime Culture Holdings, Vision International Holdings and Sling Group Holdings. This means that, in the recent industry expansion, Yue Yuen Industrial (Holdings) has not been able to realize the gains unlike its industry peers.
In terms of returns from investment, Yue Yuen Industrial (Holdings) has fallen short of achieving a 20% return on equity (ROE), recording 9.7% instead. Furthermore, its return on assets (ROA) of 5.6% is below the HK Luxury industry of 6.0%, indicating Yue Yuen Industrial (Holdings)’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Yue Yuen Industrial (Holdings)’s debt level, has increased over the past 3 years from 9.3% to 9.5%.
What does this mean?
Though Yue Yuen Industrial (Holdings)’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that endure a prolonged period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. You should continue to research Yue Yuen Industrial (Holdings) to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 551’s future growth? Take a look at our free research report of analyst consensus for 551’s outlook.
- Financial Health: Are 551’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 email@example.com.