Does Chow Tai Fook Jewellery Group Limited’s (HKG:1929) 12% Earnings Growth Reflect The Long-Term Trend?

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After reading Chow Tai Fook Jewellery Group Limited’s (HKG:1929) latest earnings update (31 March 2019), 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 1929 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.

View our latest analysis for Chow Tai Fook Jewellery Group

How Well Did 1929 Perform?

1929’s trailing twelve-month earnings (from 31 March 2019) of HK$4.6b has jumped 12% 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 1929 is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is only a result of industry tailwinds, or if Chow Tai Fook Jewellery Group has experienced some company-specific growth.

SEHK:1929 Income Statement, June 18th 2019
SEHK:1929 Income Statement, June 18th 2019

In terms of returns from investment, Chow Tai Fook Jewellery Group has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 7.7% exceeds the HK Specialty Retail industry of 6.5%, indicating Chow Tai Fook Jewellery Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Chow Tai Fook Jewellery Group’s debt level, has increased over the past 3 years from 11% to 19%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are affecting the industry as a whole, hence the high industry growth rate over the same time frame. I suggest you continue to research Chow Tai Fook Jewellery Group to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 1929’s future growth? Take a look at our free research report of analyst consensus for 1929’s outlook.
  2. Financial Health: Are 1929’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 March 2019. 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.