Where Road King Infrastructure Limited (HKG:1098) Stands In Terms Of Earnings Growth Against Its Industry
In this article, I will take a look at Road King Infrastructure Limited’s (HKG:1098) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of 1098’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for Road King Infrastructure
Did 1098’s recent earnings growth beat the long-term trend and the industry?
1098’s trailing twelve-month earnings (from 31 December 2017) of HK$1.94b has jumped 55.49% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11.85%, indicating the rate at which 1098 is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is merely due to industry tailwinds, or if Road King Infrastructure has experienced some company-specific growth.
The hike in earnings seems to be bolstered by a robust top-line increase overtaking its growth rate of expenses. Though this has led to a margin contraction, it has made Road King Infrastructure more profitable. Scanning growth from a sector-level, the HK real estate industry has been growing its average earnings by double-digit 46.68% in the previous year, and a more subdued 4.76% over the last five years. This shows that whatever uplift the industry is benefiting from, Road King Infrastructure is capable of amplifying this to its advantage.
In terms of returns from investment, Road King Infrastructure has not invested its equity funds well, leading to a 11.46% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.56% is below the HK Real Estate industry of 3.99%, indicating Road King Infrastructure’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Road King Infrastructure’s debt level, has increased over the past 3 years from 9.70% to 13.79%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 96.39% to 94.35% over the past 5 years.
What does this mean?
Though Road King Infrastructure’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 Road King Infrastructure to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1098’s future growth? Take a look at our free research report of analyst consensus for 1098’s outlook.
Financial Health: Is 1098’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 31 December 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.
