Today I will examine WT Group Holdings Limited’s (SEHK:8422) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of 8422’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. Check out our latest analysis for WT Group Holdings

Despite a decline, did 8422 underperform the long-term trend and the industry?

To account for any quarterly or half-yearly updates, 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 technique allows me to examine different companies on a more comparable basis, using the latest information. For WT Group Holdings, its most recent trailing-twelve-month earnings is -HK$4.28M, which, in comparison to the prior year’s level, has turned from positive to negative. Given that these figures may be somewhat short-term thinking, I have computed an annualized five-year figure for WT Group Holdings’s earnings, which stands at HK$5.48M.

We can further assess WT Group Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years WT Group Holdings’s top-line has grown by 28.68% on average, implying that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Eyeballing growth from a sector-level, the HK construction industry has been enduring some headwinds over the prior year, leading to average earnings dropping by more than half. This is a a notable change, given that the industry has been delivering a relatively flat growth rate over the previous few years. This means that any recent the industry is facing, it’s hitting WT Group Holdings harder than its peers.

What does this mean?

WT Group 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 happen in the future and when. The most insightful step is to assess company-specific issues WT Group Holdings may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research WT Group Holdings to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is 8422’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. 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 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.