Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Guoan International Limited’s (SEHK:143) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Guoan International
Was 143 weak performance lately part of a long-term decline?
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 enables me to examine different stocks on a more comparable basis, using the latest information. For Guoan International, its latest earnings is -HK$35.0M, which compared to last year’s figure, has become more negative. Given that these figures may be fairly myopic, I’ve computed an annualized five-year figure for 143’s earnings, which stands at -HK$15.5M. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.
We can further evaluate Guoan International’s loss by researching what’s going on in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the past couple of years has risen by a mere 9.02%. Given that top-line growth is also pretty stale the key to profitability moving forward would be managing costs. Eyeballing growth from a sector-level, the HK commercial services industry has been growing, albeit, at a unexciting single-digit rate of 4.40% over the previous twelve months, and 8.48% over the previous five years. This means whatever near-term headwind the industry is experiencing, it’s hitting Guoan International harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will happen in the future and when. The most valuable step is to examine company-specific issues Guoan International may be facing and whether management guidance has dependably been met in the past. You should continue to research Guoan International to get a more holistic view of the stock by looking at:
1. Financial Health: Is 143’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.