For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Tang Palace (China) Holdings Limited (SEHK:1181) useful as an attempt to give more color around how Tang Palace (China) Holdings is currently performing. See our latest analysis for Tang Palace (China) Holdings

How Well Did 1181 Perform?

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 method allows me to analyze different stocks in a uniform manner using the most relevant data points. For Tang Palace (China) Holdings, its most recent trailing-twelve-month earnings is CN¥131.33M, which, against last year’s level, has moved up by 30.04%. Given that these values are relatively short-term, I’ve calculated an annualized five-year value for Tang Palace (China) Holdings’s earnings, which stands at CN¥64.12M This suggests that, on average, Tang Palace (China) Holdings has been able to consistently improve its net income over the last couple of years as well.

How has it been able to do this? Well, let’s take a look at if it is only attributable to an industry uplift, or if Tang Palace (China) Holdings has seen some company-specific growth. In the past couple of years, Tang Palace (China) Holdings increased its bottom line faster than revenue by efficiently controlling its costs. This has caused a margin expansion and profitability over time. Scanning growth from a sector-level, the HK hospitality industry has been growing its average earnings by double-digit 22.95% in the previous year, . This is a turnaround from a volatile drop of -4.09% in the previous few years. This means that, in the recent industry expansion, Tang Palace (China) Holdings is able to amplify this to its advantage.

What does this mean?

Though Tang Palace (China) Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Tang Palace (China) Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Tang Palace (China) Holdings to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for 1181’s future growth? Take a look at our free research report of analyst consensus for 1181’s outlook.

2. Financial Health: Is 1181’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.

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 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.