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After reading Luk Fook Holdings (International) Limited's (HKG:590) latest earnings update (31 March 2019), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 590 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Check out our latest analysis for Luk Fook Holdings (International)
Did 590 beat its long-term earnings growth trend and its industry?
590's trailing twelve-month earnings (from 31 March 2019) of HK$1.5b has increased by 9.0% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.9%, indicating the rate at which 590 is growing has accelerated. What's the driver of this growth? Let's take a look at if it is solely owing to industry tailwinds, or if Luk Fook Holdings (International) has experienced some company-specific growth.
In terms of returns from investment, Luk Fook Holdings (International) has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 10% exceeds the HK Specialty Retail industry of 6.4%, indicating Luk Fook Holdings (International) has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Luk Fook Holdings (International)’s debt level, has increased over the past 3 years from 14% to 18%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Luk Fook Holdings (International) gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Luk Fook Holdings (International) to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 590’s future growth? Take a look at our free research report of analyst consensus for 590’s outlook.
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Financial Health: Are 590’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.
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Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.