After reading Echo International Holdings Group Limited’s (SEHK:8218) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Echo International Holdings Group’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Echo International Holdings Group

How Well Did 8218 Perform?

For the purpose of this commentary, I like to 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 enables me to examine various companies in a uniform manner using the most relevant data points. For Echo International Holdings Group, its most recent bottom-line (trailing twelve month) is -HK$13.6M, which compared to the previous year’s level, has become less negative. Since these values are fairly nearsighted, I’ve determined an annualized five-year value for 8218’s net income, which stands at -HK$7.4M. This means Echo International Holdings Group has historically performed better than recently, though it seems like earnings are now heading back towards to right direction again.

Additionally, we can analyze Echo International Holdings Group’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -8.98%. The key to profitability here is to make sure the company’s cost growth is well-managed. Eyeballing growth from a sector-level, the HK electronic industry has been growing its average earnings by double-digit 20.99% over the previous year, and 10.26% over the previous five years. This shows that any uplift the industry is deriving benefit from, Echo International Holdings Group has not been able to realize the gains unlike its industry peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will happen in the future and when. The most valuable step is to assess company-specific issues Echo International Holdings Group may be facing and whether management guidance has consistently been met in the past. You should continue to research Echo International Holdings Group to get a more holistic view of the stock by looking at:

1. Financial Health: Is 8218’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 30 September 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.