Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Tomson Group Limited’s (HKG:258) 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.
Were 258’s earnings stronger than its past performances and the industry?258’s trailing twelve-month earnings (from 31 December 2017) of HK$1.26b has jumped 43.28% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 43.20%, indicating the rate at which 258 is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is solely attributable to an industry uplift, or if Tomson Group has experienced some company-specific growth.
Over the last few years, Tomson Group increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the HK real estate industry has been growing its average earnings by double-digit 43.27% in the prior year, and a more muted 5.05% over the last five years. This growth is a median of profitable companies of 25 Real Estate companies in HK including S E A Holdings, Sino Harbour Holdings Group and Y. T. Realty Group. This means whatever tailwind the industry is deriving benefit from, Tomson Group is capable of leveraging this to its advantage.In terms of returns from investment, Tomson Group has not invested its equity funds well, leading to a 9.95% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 5.52% exceeds the HK Real Estate industry of 3.92%, indicating Tomson Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Tomson Group’s debt level, has increased over the past 3 years from 0.80% to 7.45%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 36.50% to 5.90% over the past 5 years.
What does this mean?
Though Tomson Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Tomson Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Tomson Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 258’s future growth? Take a look at our free research report of analyst consensus for 258’s outlook.
- Financial Health: Is 258’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.