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In this commentary, I will examine Grand Brilliance Group Holdings Limited’s (SEHK:8372) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the healthcare industry performed. As an investor, I find it beneficial to assess 8372’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. See our latest analysis for Grand Brilliance Group Holdings
How Well Did 8372 Perform?
For the most up-to-date info, I 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 allows me to analyze different companies on a more comparable basis, using new information. For Grand Brilliance Group Holdings, its most recent earnings (trailing twelve month) is HK$10.50M, which, against the previous year’s level, has fallen by -17.24%. Since these values may be relatively short-term thinking, I’ve calculated an annualized five-year figure for 8372’s net income, which stands at HK$11.76M This doesn’t seem to paint a better picture, since earnings seem to have gradually been deteriorating over time.
Why could this be happening? Let’s examine what’s transpiring with margins and whether the whole industry is experiencing the hit as well. Although revenue growth over the past few years, has been negative, earnings growth has been falling by even more, meaning Grand Brilliance Group Holdings has been increasing its expenses. This hurts margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the HK healthcare industry has been growing, albeit, at a subdued single-digit rate of 7.11% in the prior twelve months, and 7.68% over the previous five years. This shows that any uplift the industry is deriving benefit from, Grand Brilliance Group Holdings has not been able to reap as much as its average peer.
What does this mean?
Though Grand Brilliance Group Holdings’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry growth and disruption. You should continue to research Grand Brilliance Group Holdings to get a more holistic view of the stock by looking at:
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Financial Health: Is 8372’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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Valuation: What is 8372 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 8372 is currently mispriced by the market.
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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.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 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.