Advertisement

Where Zhong Ao Home Group Limited (HKG:1538) Stands In Terms Of Earnings Growth Against Its Industry

Investors with a long-term horizong may find it valuable to assess Zhong Ao Home Group Limited's (SEHK:1538) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Zhong Ao Home Group is currently performing.

Check out our latest analysis for Zhong Ao Home Group

Commentary On 1538's Past Performance

1538's trailing twelve-month earnings (from 31 December 2019) of CN¥109m has jumped 13% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 42%, indicating the rate at which 1538 is growing has slowed down. To understand what's happening, let's examine what's going on with margins and whether the entire industry is feeling the heat.

SEHK:1538 Income Statement April 6th 2020
SEHK:1538 Income Statement April 6th 2020

In terms of returns from investment, Zhong Ao Home Group has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 6.6% exceeds the HK Real Estate industry of 2.9%, indicating Zhong Ao Home Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Zhong Ao Home Group’s debt level, has increased over the past 3 years from 0.6% to 23%.

What does this mean?

Though Zhong Ao Home Group's past data is helpful, it is only one aspect of my investment thesis. While Zhong Ao Home Group has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Zhong Ao Home Group to get a more holistic view of the stock by looking at:

  1. Financial Health: Are 1538’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.

  2. Valuation: What is 1538 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1538 is currently mispriced by the market.

  3. 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.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.