After looking at Gold Tat Group International Limited’s (SEHK:8266) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for Gold Tat Group International

How 8266 fared against its long-term earnings performance and its industry

I look at 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 enables me to analyze different companies on a more comparable basis, using the latest information. For Gold Tat Group International, its most recent bottom-line (trailing twelve month) is -HK$90.3M, which compared to the prior year’s figure, has become less negative. Given that these values are fairly myopic, I have created an annualized five-year figure for Gold Tat Group International’s net income, which stands at -HK$66.8M. This means Gold Tat Group International has historically performed better than recently, even though it seems like earnings are now heading back in the right direction again.

We can further assess Gold Tat Group International’s loss by looking at what has been happening in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the past couple of years has risen by 18.72%, implying that Gold Tat Group International is in a high-growth phase with expenses shooting ahead of elevated top-line growth rates, leading to yearly losses. Viewing growth from a sector-level, the HK electronic industry has been growing its average earnings by double-digit 19.23% over the prior twelve months, and 10.26% over the past couple of years. This means whatever tailwind the industry is deriving benefit from, Gold Tat Group International has not been able to leverage it as much as its industry peers.

What does this mean?

Though Gold Tat Group International’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most valuable step is to examine company-specific issues Gold Tat Group International may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Gold Tat Group International to get a more holistic view of the stock by looking at: