After looking at Zhidao International (Holdings) Limited’s (SEHK:1220) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for Zhidao International (Holdings)
How Did 1220’s Recent Performance Stack Up Against Its Past?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend enables me to assess different stocks on a similar basis, using the latest information. For Zhidao International (Holdings), its latest earnings is -HK$19.5M, which compared to the previous year’s figure, has become less negative. Since these values may be somewhat nearsighted, I have determined an annualized five-year value for 1220’s earnings, which stands at HK$273.4M.
Additionally, we can assess Zhidao International (Holdings)’s loss by looking at what’s going on in the industry as well as within the company. First, I want to briefly look into the line items. Revenue growth over the last few years has been negative at -37.78%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the HK diversified financial industry has been growing its average earnings by double-digit 15.63% over the past year, and a less exciting 2.17% over the past couple of years. This means although Zhidao International (Holdings) is presently loss-making, it may have gained from industry tailwinds, moving earnings in the right direction.
What does this mean?
Zhidao International (Holdings)’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most insightful step is to examine company-specific issues Zhidao International (Holdings) may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Zhidao International (Holdings) to get a more holistic view of the stock by looking at: