In this article, I will take a look at Hong Fok Corporation Limited’s (SGX:H30) most recent earnings update (31 December 2018) and compare these latest figures against its performance over the past few years, along with how the rest of H30’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Were H30’s earnings stronger than its past performances and the industry?
H30’s trailing twelve-month earnings (from 31 December 2018) of S$189m has increased by 6.1% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -9.6%, indicating the rate at which H30 is growing has accelerated. What’s the driver of this growth? Let’s see if it is solely a result of an industry uplift, or if Hong Fok has seen some company-specific growth.
In terms of returns from investment, Hong Fok has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 6.4% exceeds the SG Real Estate industry of 3.5%, indicating Hong Fok has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hong Fok’s debt level, has increased over the past 3 years from 0.2% to 3.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 46% to 31% over the past 5 years.
What does this mean?
Hong Fok’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Hong Fok to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for H30’s future growth? Take a look at our free research report of analyst consensus for H30’s outlook.
- Financial Health: Are H30’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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