After reading Dragon Crown Group Holdings Limited’s (HKG:935) latest earnings update (31 December 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 935 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
How Well Did 935 Perform?
935’s trailing twelve-month earnings (from 31 December 2018) of HK$67m has jumped 33% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -11%, indicating the rate at which 935 is growing has accelerated. What’s the driver of this growth? Let’s take a look at whether it is only due to an industry uplift, or if Dragon Crown Group Holdings has seen some company-specific growth.
In terms of returns from investment, Dragon Crown Group Holdings has fallen short of achieving a 20% return on equity (ROE), recording 6.9% instead. Furthermore, its return on assets (ROA) of 4.5% is below the HK Commercial Services industry of 6.2%, indicating Dragon Crown Group Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Dragon Crown Group Holdings’s debt level, has declined over the past 3 years from 10.0% to 7.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 15% to 16% over the past 5 years.
What does this mean?
Dragon Crown Group Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be variables that are influencing the industry as a whole, thus the high industry growth rate over the same period of time. I recommend you continue to research Dragon Crown Group Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 935’s future growth? Take a look at our free research report of analyst consensus for 935’s outlook.
- Financial Health: Are 935’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 December 2018. This may not be consistent with full year annual report figures.
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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.