Assessing Sanroc International Holdings Limited’s (SEHK:1660) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess 1660’s recent performance announced on 30 September 2017 and evaluate these figures to its longer term trend and industry movements. Check out our latest analysis for Sanroc International Holdings
Was 1660’s recent earnings decline worse than the long-term trend and the industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to examine many different companies on a similar basis, using the most relevant data points. For Sanroc International Holdings, its latest earnings (trailing twelve month) is HK$19.70M, which, in comparison to the prior year’s figure, has plunged by -21.39%. Given that these figures may be fairly nearsighted, I’ve created an annualized five-year value for 1660’s net income, which stands at HK$21.72M This doesn’t seem to paint a better picture, as earnings seem to have steadily been deteriorating over time.Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the whole industry is experiencing the hit as well. Revenue growth in the past few years, has been positive, nevertheless earnings growth has been falling. This means Sanroc International Holdings has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the HK trade distributors industry has been growing its average earnings by double-digit 20.53% in the prior year, and 15.50% over the previous five years. This means that any tailwind the industry is enjoying, Sanroc International Holdings has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that endure a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. You should continue to research Sanroc International Holdings to get a better picture of the stock by looking at:
- Financial Health: Is 1660’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.