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For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Grand Ming Group Holdings Limited (HKG:1271) useful as an attempt to give more color around how Grand Ming Group Holdings is currently performing.
How Did 1271’s Recent Performance Stack Up Against Its Past?
1271’s trailing twelve-month earnings (from 31 March 2019) of HK$149m has declined by -13% 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 -28%, indicating the rate at which 1271 is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Grand Ming Group Holdings has fallen short of achieving a 20% return on equity (ROE), recording 5.3% instead. Furthermore, its return on assets (ROA) of 2.9% is below the HK Construction industry of 5.7%, indicating Grand Ming Group Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Grand Ming Group Holdings’s debt level, has declined over the past 3 years from 4.7% to 3.5%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 46% to 141% over the past 5 years.
What does this mean?
Though Grand Ming Group Holdings’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that experience a prolonged period of diminishing earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Grand Ming Group Holdings and its peers a riskier investment. You should continue to research Grand Ming Group Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1271’s future growth? Take a look at our free research report of analyst consensus for 1271’s outlook.
- Financial Health: Are 1271’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 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 email@example.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.