In this article, I will take a look at Sunfonda Group Holdings Limited's (HKG:1771) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of 1771'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.
Did 1771 beat its long-term earnings growth trend and its industry?
1771's trailing twelve-month earnings (from 30 June 2019) of CN¥186m has increased by 4.3% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which 1771 is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Sunfonda Group Holdings has fallen short of achieving a 20% return on equity (ROE), recording 9.3% instead. Furthermore, its return on assets (ROA) of 5.9% is below the HK Specialty Retail industry of 6.2%, indicating Sunfonda Group Holdings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Sunfonda Group Holdings’s debt level, has declined over the past 3 years from 9.0% to 8.9%.
What does this mean?
Though Sunfonda Group Holdings'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 Sunfonda Group Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1771’s future growth? Take a look at our free research report of analyst consensus for 1771’s outlook.
- Financial Health: Are 1771’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 2019. This may not be consistent with full year annual report figures.
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