When TC Orient Lighting Holdings Limited (SEHK:515) released its most recent earnings update (30 June 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how TC Orient Lighting Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 515 has performed. See our latest analysis for TC Orient Lighting Holdings
How 515 fared against its long-term earnings performance and its industry
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to analyze different stocks on a similar basis, using the latest information. For TC Orient Lighting Holdings, its latest twelve-month earnings is -HK$64.1M, which compared to the previous year’s figure, has become less negative. Since these values may be relatively short-term thinking, I have computed an annualized five-year value for TC Orient Lighting Holdings’s earnings, which stands at -HK$109.9M. This means that, even though net income is negative, it has become less negative over the years.
Additionally, we can assess TC Orient Lighting Holdings’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last few years has been negative at -15.99%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the HK electronic industry has been growing its average earnings by double-digit 19.23% in the previous year, and a more subdued 7.49% over the past couple of years. This means that any tailwind the industry is profiting from, TC Orient Lighting Holdings has not been able to realize the gains unlike its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues TC Orient Lighting Holdings may be facing and whether management guidance has consistently been met in the past. You should continue to research TC Orient Lighting Holdings to get a better picture of the stock by looking at:
1. Financial Health: Is 515’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.