Where Sinotruk (Hong Kong) Limited (HKG:3808) Stands In Terms Of Earnings Growth Against Its Industry

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When Sinotruk (Hong Kong) Limited (HKG:3808) announced its most recent earnings (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Sinotruk (Hong Kong) has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see 3808 has performed.

Check out our latest analysis for Sinotruk (Hong Kong)

Commentary On 3808’s Past Performance

3808’s trailing twelve-month earnings (from 31 December 2018) of CN¥4.3b has jumped 44% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 61%, indicating the rate at which 3808 is growing has slowed down. To understand what’s happening, let’s look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well.

SEHK:3808 Income Statement, July 12th 2019
SEHK:3808 Income Statement, July 12th 2019

In terms of returns from investment, Sinotruk (Hong Kong) has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 7.1% exceeds the HK Machinery industry of 6.1%, indicating Sinotruk (Hong Kong) has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Sinotruk (Hong Kong)’s debt level, has increased over the past 3 years from 2.2% to 20%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 47% to 11% over the past 5 years.

What does this mean?

Though Sinotruk (Hong Kong)’s past data is helpful, it is only one aspect of my investment thesis. While Sinotruk (Hong Kong) has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Sinotruk (Hong Kong) to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 3808’s future growth? Take a look at our free research report of analyst consensus for 3808’s outlook.
  2. Financial Health: Are 3808’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.
  3. 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 December 2018. 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 editorial-team@simplywallst.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.