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Examining Great Wall Motor Company Limited’s (SEHK:2333) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 2333’s latest performance announced on 31 December 2017 and weight these figures against its longer term trend and industry movements. View our latest analysis for Great Wall Motor
How Did 2333’s Recent Performance Stack Up Against Its Past?
I prefer to use 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 allows me to assess many different companies on a more comparable basis, using new information. For Great Wall Motor, its latest trailing-twelve-month earnings is CN¥5.03B, which compared to the prior year’s figure, has plunged by a significant -52.35%. Given that these figures may be relatively nearsighted, I’ve computed an annualized five-year value for Great Wall Motor’s earnings, which stands at CN¥7.05B This doesn’t look much better, since earnings seem to have consistently been deteriorating over the longer term.
Why could this be happening? Let’s examine what’s going on with margins and whether the entire industry is feeling the heat. Revenue growth over the past few years, has been positive, however, earnings growth has not been able to catch up, meaning Great Wall Motor has been growing its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the HK auto industry has been growing, albeit, at a muted single-digit rate of 3.25% in the previous twelve months, and 9.45% over the past half a decade. This means any recent headwind the industry is experiencing, it’s hitting Great Wall Motor harder than its peers.
What does this mean?
Great Wall Motor’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience a prolonged period of decline in earnings are going through some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a signal of a structural change, which makes Great Wall Motor and its peers a higher risk investment. I recommend you continue to research Great Wall Motor to get a more holistic view of the stock by looking at: