In This Article:
For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Great Wall Motor Company Limited’s (HKG:2333) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
View our latest analysis for Great Wall Motor
Was 2333 weak performance lately part of a long-term decline?
2333’s trailing twelve-month earnings (from 30 September 2018) of CN¥6.1b has declined by -2.4% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -5.3%, indicating the rate at which 2333 is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Great Wall Motor has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 6.3% exceeds the HK Auto industry of 5.8%, indicating Great Wall Motor has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Great Wall Motor’s debt level, has declined over the past 3 years from 28% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.007% to 38% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that face a drawn out period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. I suggest you continue to research Great Wall Motor to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 2333’s future growth? Take a look at our free research report of analyst consensus for 2333’s outlook.
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Financial Health: Are 2333’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.