Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Good Friend International Holdings Inc’s (HKG:2398) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View out our latest analysis for Good Friend International Holdings
Could 2398 beat the long-term trend and outperform its industry?2398’s trailing twelve-month earnings (from 31 December 2017) of HK$65.69m has increased by 8.13% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -12.80%, indicating the rate at which 2398 is growing has accelerated. How has it been able to do this? Let’s see whether it is merely a result of an industry uplift, or if Good Friend International Holdings has seen some company-specific growth.
Though both top-line and bottom-line growth rates in the past few years were on average negative, earnings were more so. While this resulted in a margin contraction, it has moderated Good Friend International Holdings’s earnings contraction. Looking at growth from a sector-level, the HK machinery industry has been growing its average earnings by double-digit 16.94% in the previous twelve months, . This is a change from a volatile drop of -5.25% in the previous couple of years. This means in the recent industry expansion, Good Friend International Holdings has not been able to gain as much as its industry peers.In terms of returns from investment, Good Friend International Holdings has not invested its equity funds well, leading to a 7.94% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.56% is below the HK Machinery industry of 3.68%, indicating Good Friend International Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Good Friend International Holdings’s debt level, has declined over the past 3 years from 16.82% to 9.57%.
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. There may be factors that are impacting the industry as a whole, thus the high industry growth rate over the same time period. I suggest you continue to research Good Friend International Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 2398’s future growth? Take a look at our free research report of analyst consensus for 2398’s outlook.
- Financial Health: Is 2398’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.