After reading Winshine Science Company Limited’s (SEHK:209) most recent earnings announcement (30 June 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Winshine Science
Could 209 beat the long-term trend and outperform its industry?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to analyze many different companies on a similar basis, using new information. Winshine Science’s most recent twelve-month earnings -HK$110.3M, which compared to the prior year’s figure, has become less negative. Given that these figures may be somewhat short-term thinking, I have calculated an annualized five-year value for Winshine Science’s earnings, which stands at -HK$133.2M. This means despite the fact that net income is negative, it has become less negative over the years.
We can further assess Winshine Science’s loss by looking at what’s going on in the industry along with within the company. Initially, I want to quickly look into the line items. Revenue growth over past couple of years has been negative at -11.47%. The key to profitability here is to make sure the company’s cost growth is well-controlled. Looking at growth from a sector-level, the HK leisure products industry has been growing its average earnings by double-digit 25.02% over the past year, and a flatter -1.55% over the past five. This shows that, while Winshine Science is currently loss-making, it may have only just been aided by the recent industry expansion, moving earnings into a more favorable position.
What does this mean?
Though Winshine Science’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues Winshine Science may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Winshine Science to get a more holistic view of the stock by looking at: