With A -12% Earnings Drop, Did Tomson Group Limited (HKG:258) Really Underperform?

Measuring Tomson Group Limited’s (HKG:258) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess 258’s recent performance announced on 30 June 2018 and compare these figures to its historical trend and industry movements.

Check out our latest analysis for Tomson Group

Was 258’s recent earnings decline indicative of a tough track record?

258’s trailing twelve-month earnings (from 30 June 2018) of HK$999m has declined by -12% 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 40%, indicating the rate at which 258 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the entire industry is facing the same headwind.

SEHK:258 Income Statement Export November 22nd 18
SEHK:258 Income Statement Export November 22nd 18

In terms of returns from investment, Tomson Group has fallen short of achieving a 20% return on equity (ROE), recording 7.6% instead. However, its return on assets (ROA) of 4.0% exceeds the HK Real Estate industry of 3.8%, 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 1.3% to 4.9%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 40% to 11% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I suggest you continue to research Tomson Group to get a better picture of the stock by looking at:

  1. 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.
  2. Financial Health: Are 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.
  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 30 June 2018. This may not be consistent with full year annual report figures.

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 editorial-team@simplywallst.com.