When China Greenfresh Group Co., Ltd.’s (SEHK:6183) announced its latest earnings (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were China Greenfresh Group’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 6183 actually performed well. Below is a quick commentary on how I see 6183 has performed.
Did 6183 perform worse than its track record and industry?
6183’s trailing twelve-month earnings (from 30 June 2019) of CN¥138m has declined by -15% 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 -5.4%, indicating the rate at which 6183 is growing has slowed down. Why could this be happening? Let’s examine what’s transpiring with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, China Greenfresh Group has fallen short of achieving a 20% return on equity (ROE), recording 6.3% instead. Furthermore, its return on assets (ROA) of 5.6% is below the HK Food industry of 6.3%, indicating China Greenfresh Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China Greenfresh Group’s debt level, has declined over the past 3 years from 13% to 5.1%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that face a drawn out period of diminishing earnings are going through some sort of reinvestment phase Though if the whole industry is struggling to grow over time, it may be a indicator of a structural shift, which makes China Greenfresh Group and its peers a riskier investment. You should continue to research China Greenfresh Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 6183’s future growth? Take a look at our free research report of analyst consensus for 6183’s outlook.
- Financial Health: Are 6183’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 30 June 2019. This may not be consistent with full year annual report figures.
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