In This Article:
Understanding how Sinopharm Group Co Ltd (HKG:1099) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Sinopharm Group is doing by comparing its latest earnings with its long-term trend as well as the performance of its healthcare industry peers.
View our latest analysis for Sinopharm Group
Did 1099 beat its long-term earnings growth trend and its industry?
1099’s trailing twelve-month earnings (from 30 June 2018) of CN¥5.2b has increased by 6.8% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 19%, indicating the rate at which 1099 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the entire industry is facing the same headwind.
In the past couple of years, revenue growth has failed to keep up which implies that Sinopharm Group’s bottom line has been driven by unsustainable cost-reductions.
Viewing growth from a sector-level, the HK healthcare industry has been growing, albeit, at a subdued single-digit rate of 6.8% over the past twelve months, and 6.8% over the previous five years. This growth is a median of profitable companies of 18 Healthcare companies in HK including Common Splendor International Health Industry Group, Medicskin Holdings and New Century Healthcare Holding.
In terms of returns from investment, Sinopharm Group has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 4.2% exceeds the HK Healthcare industry of 4.1%, indicating Sinopharm Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Sinopharm Group’s debt level, has increased over the past 3 years from 17% to 17%.
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 Sinopharm Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Sinopharm Group 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 1099’s future growth? Take a look at our free research report of analyst consensus for 1099’s outlook.
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Financial Health: Are 1099’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.