Was ZTO Express (Cayman) Inc’s (NYSE:ZTO) Earnings Growth Better Than The Industry’s?
After reading ZTO Express (Cayman) Inc’s (NYSE:ZTO) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for ZTO Express (Cayman)
How Well Did ZTO Perform?
ZTO’s trailing twelve-month earnings (from 31 March 2018) of US$3.21b has jumped 56.58% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 43.26%, indicating the rate at which ZTO is growing has accelerated. What’s the driver of this growth? Let’s take a look at if it is solely attributable to an industry uplift, or if ZTO Express (Cayman) has experienced some company-specific growth.
In the past couple of years, ZTO Express (Cayman) expanded its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US logistics industry has been growing its average earnings by double-digit 24.40% over the past twelve months, and a more subdued 3.74% over the previous five years. This suggests that any uplift the industry is gaining from, ZTO Express (Cayman) is able to amplify this to its advantage.
In terms of returns from investment, ZTO Express (Cayman) has not invested its equity funds well, leading to a 15.53% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 12.19% exceeds the US Logistics industry of 4.84%, indicating ZTO Express (Cayman) has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for ZTO Express (Cayman)’s debt level, has declined over the past 3 years from 21.86% to 18.52%.
What does this mean?
ZTO Express (Cayman)’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research ZTO Express (Cayman) to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ZTO’s future growth? Take a look at our free research report of analyst consensus for ZTO’s outlook.
Financial Health: Is ZTO’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 March 2018. 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.
