Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Golden Throat Holdings Group Company Limited’s (SEHK:6896) 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 Golden Throat Holdings Group
Was 6896’s recent earnings decline worse than the long-term trend and the industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, 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 technique enables me to analyze many different companies on a similar basis, using new information. For Golden Throat Holdings Group, the most recent bottom-line is CN¥31.0M, which, in comparison to the previous year’s level, has fallen by a substantial -80.25%. Given that these values may be relatively short-term thinking, I’ve determined an annualized five-year figure for Golden Throat Holdings Group’s net income, which stands at CN¥121.1M. This doesn’t look much better, since earnings seem to have gradually been diminishing over time.
Why is this? Let’s examine what’s transpiring with margins and whether the entire industry is facing the same headwind. Revenue growth in the last couple of years, has been positive, nevertheless earnings growth has been declining. This implies that Golden Throat Holdings Group has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the HK personal products industry has been enduring severe headwinds over the previous couple of years, leading to an average earnings drop of -33.43% in the most recent year. This shows that any headwind the industry is experiencing, it’s hitting Golden Throat Holdings Group harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that face a prolonged period of decline in earnings are undergoing some sort of reinvestment phase . Though if the entire industry is struggling to grow over time, it may be a sign of a structural change, which makes Golden Throat Holdings Group and its peers a higher risk investment. You should continue to research Golden Throat Holdings Group to get a more holistic view of the stock by looking at:
1. Financial Health: Is 6896’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.