In this commentary, I will examine Dah Chong Hong Holdings Limited's (SEHK:1828) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the retail distributors industry performed. As an investor, I find it beneficial to assess 1828’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
View our latest analysis for Dah Chong Hong Holdings
Was 1828 weak performance lately part of a long-term decline?
1828's trailing twelve-month earnings (from 30 June 2019) of HK$733m has declined by -13% 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 2.4%, indicating the rate at which 1828 is growing has slowed down. Why is this? Well, let's look at what's going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Dah Chong Hong Holdings has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. Furthermore, its return on assets (ROA) of 3.3% is below the HK Retail Distributors industry of 3.6%, indicating Dah Chong Hong Holdings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Dah Chong Hong Holdings’s debt level, has declined over the past 3 years from 6.7% to 5.9%.
What does this mean?
Though Dah Chong Hong Holdings's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research Dah Chong Hong Holdings to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 1828’s future growth? Take a look at our free research report of analyst consensus for 1828’s outlook.
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Financial Health: Are 1828’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 June 2019. This may not be consistent with full year annual report figures.
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.
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