For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Kwan On Holdings Limited’s (SEHK:1559) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. View our latest analysis for Kwan On Holdings
How 1559 fared against its long-term earnings performance and its industry
For the most up-to-date info, I 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 examine many different companies on a more comparable basis, using the latest information. “For Kwan On Holdings, its “, latest twelve-month earnings is HK$24.5M, which, relative to the previous year’s level, has risen by 15.84%. Given that these values may be somewhat myopic, I have created an annualized five-year value for 1559’s earnings, which stands at HK$23.0M. This suggests that, on average, Kwan On Holdings has been able to increasingly grow its bottom line over the past couple of years as well.
What’s enabled this growth? Let’s take a look at whether it is only due to industry tailwinds, or if Kwan On Holdings has seen some company-specific growth. In the last few years, Kwan On Holdings expanded its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Viewing growth from a sector-level, the HK construction and engineering industry has been enduring some headwinds over the previous year, leading to average earnings dropping by more than half. This is a a solid change, given that the industry has been delivering a relatively flat growth rate over the last couple of years. This shows that whatever recent headwind the industry is enduring, the impact on Kwan On Holdings has been softer relative to its peers.
What does this mean?
Kwan On Holdings’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 recommend you continue to research Kwan On Holdings to get a better picture of the stock by looking at:
1. Financial Health: Is 1559’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.