Assessing Gain Plus Holdings Limited’s (SEHK:8522) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess 8522’s recent performance announced on 31 December 2017 and evaluate these figures to its long-term trend and industry movements. Check out our latest analysis for Gain Plus Holdings
How Did 8522’s Recent Performance Stack Up Against Its Past?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to examine different stocks in a uniform manner using the latest information. For Gain Plus Holdings, its most recent bottom-line (trailing twelve month) is HK$13.28M, which compared to the previous year’s level, has plunged by a substantial -35.54%. Given that these values may be relatively myopic, I have determined an annualized five-year figure for Gain Plus Holdings’s net income, which stands at HK$16.10M This doesn’t seem to paint a better picture, since earnings seem to have gradually been declining over the longer term.
Why could this be happening? Well, let’s look at what’s occurring with margins and if the whole industry is facing the same headwind. Revenue growth in the past few years, has been positive, however, earnings growth has fallen behind meaning Gain Plus Holdings has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the HK construction industry has been enduring some headwinds in the prior year, leading to an average earnings drop of -7.15%. This is a significant change, given that the industry has been delivering a positive rate of 9.50%, on average, over the past five years. This shows that whatever recent headwind the industry is enduring, it’s hitting Gain Plus Holdings harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that experience a prolonged period of decline in earnings are undergoing some sort of reinvestment phase However, if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Gain Plus Holdings and its peers a higher risk investment. I recommend you continue to research Gain Plus Holdings to get a more holistic view of the stock by looking at: