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Where Sun Hung Kai Properties Limited's (HKG:16) Earnings Growth Stands Against Its Industry

Simply Wall St

Measuring Sun Hung Kai Properties Limited's (SEHK:16) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 16's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.

View our latest analysis for Sun Hung Kai Properties

Was 16's recent earnings decline indicative of a tough track record?

16's trailing twelve-month earnings (from 30 June 2019) of HK$45b has declined by -10% 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 9.9%, indicating the rate at which 16 is growing has slowed down. Why could this be happening? Let's examine what's occurring with margins and whether the entire industry is experiencing the hit as well.

SEHK:16 Income Statement, October 3rd 2019

In terms of returns from investment, Sun Hung Kai Properties has fallen short of achieving a 20% return on equity (ROE), recording 8.0% instead. However, its return on assets (ROA) of 6.2% exceeds the HK Real Estate industry of 2.9%, indicating Sun Hung Kai Properties has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Sun Hung Kai Properties’s debt level, has increased over the past 3 years from 5.1% to 5.5%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 20% to 16% over the past 5 years.

What does this mean?

Though Sun Hung Kai Properties'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 recommend you continue to research Sun Hung Kai Properties to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 16’s future growth? Take a look at our free research report of analyst consensus for 16’s outlook.
  2. Financial Health: Are 16’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.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.