After reading Wynn Macau Limited’s (SEHK:1128) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Wynn Macau’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Wynn Macau
How 1128 fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I 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 technique enables me to examine different stocks on a more comparable basis, using the latest information. For Wynn Macau, the most recent bottom-line is $339.1M, which compared to last year’s figure, has moved up by an impressive 68.03%. Given that these figures are somewhat myopic, I have created an annualized five-year value for Wynn Macau’s earnings, which stands at $635.9M. This means even though earnings growth from last year was positive, over the past couple of years, Wynn Macau’s earnings have been falling on average.
Why could this be happening? Well, let’s look at what’s going on with margins and if the entire industry is feeling the heat. Although revenue growth over the last few years, has been negative, earnings growth has been deteriorating by even more, meaning Wynn Macau has been ramping up its expenses. This hurts margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the HK hospitality industry has been enduring some headwinds over the past couple of years, leading to an average earnings drop of -8.14% in the most recent year. This means whatever near-term headwind the industry is experiencing, Wynn Macau is relatively better-cushioned than its peers.
What does this mean?
Wynn Macau’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company.
I recommend you continue to research Wynn Macau to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for 1128’s future growth? Take a look at our free research report of analyst consensus for 1128’s outlook.