In this commentary, I will examine Beijing Tong Ren Tang Chinese Medicine Company Limited’s (SEHK:8138) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the pharmaceuticals industry performed. As an investor, I find it beneficial to assess 8138’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 Beijing Tong Ren Tang Chinese Medicine

Commentary On 8138’s Past Performance

I look at data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend enables me to analyze different companies in a uniform manner using the most relevant data points. For Beijing Tong Ren Tang Chinese Medicine, its most recent earnings (trailing twelve month) is HK$489.97M, which, in comparison to the previous year’s level, has increased by 16.57%. Given that these values are relatively myopic, I have calculated an annualized five-year value for Beijing Tong Ren Tang Chinese Medicine’s net income, which stands at HK$302.57M This means that, on average, Beijing Tong Ren Tang Chinese Medicine has been able to steadily improve its net income over the past couple of years as well.

What’s enabled this growth? Let’s take a look at if it is merely owing to industry tailwinds, or if Beijing Tong Ren Tang Chinese Medicine has experienced some company-specific growth. In the past few years, Beijing Tong Ren Tang Chinese Medicine increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the HK pharmaceuticals industry has been growing its average earnings by double-digit 16.57% over the past twelve months, and 16.58% over the last five years. This shows that any tailwind the industry is profiting from, Beijing Tong Ren Tang Chinese Medicine has not been able to reap as much as its industry peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Beijing Tong Ren Tang Chinese Medicine gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Beijing Tong Ren Tang Chinese Medicine to get a better picture of the stock by looking at: