Understanding how Emperor Entertainment Hotel Limited (SEHK:296) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Emperor Entertainment Hotel is doing by comparing its latest earnings with its long-term trend as well as the performance of its hospitality industry peers.
Could 296 beat the long-term trend and outperform its industry?
296’s trailing twelve-month earnings (from 30 September 2019) of HK$416m has increased by 2.9% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.4%, indicating the rate at which 296 is growing has accelerated. What’s the driver of this growth? Let’s see if it is only due to industry tailwinds, or if Emperor Entertainment Hotel has experienced some company-specific growth.
In terms of returns from investment, Emperor Entertainment Hotel has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. However, its return on assets (ROA) of 6.5% exceeds the HK Hospitality industry of 4.7%, indicating Emperor Entertainment Hotel has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Emperor Entertainment Hotel’s debt level, has declined over the past 3 years from 7.1% to 5.0%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. I recommend you continue to research Emperor Entertainment Hotel to get a better picture of the stock by looking at:
- Financial Health: Are 296’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.
- Valuation: What is 296 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 296 is currently mispriced by the market.
- 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 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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