Assessing Zhongzhi Pharmaceutical Holdings Limited’s (SEHK:3737) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Zhongzhi Pharmaceutical Holdings is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its personal products industry peers. See our latest analysis for Zhongzhi Pharmaceutical Holdings

How 3737 fared against its long-term earnings performance and its industry

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 enables me to analyze various companies on a similar basis, using the latest information. For Zhongzhi Pharmaceutical Holdings, its most recent trailing-twelve-month earnings is CN¥60.39M, which, in comparison to the prior year’s level, has jumped up by 19.79%. Since these values are relatively short-term thinking, I have estimated an annualized five-year figure for Zhongzhi Pharmaceutical Holdings’s net income, which stands at CN¥65.16M This suggests that, despite the fact that earnings growth from last year was positive, over the long run, Zhongzhi Pharmaceutical Holdings’s earnings have been declining on average.

What could be happening here? Well, let’s take a look at what’s going on with margins and if the entire industry is experiencing the hit as well. Revenue growth in the past few years, has been positive, however, earnings growth has been lagging behind meaning Zhongzhi Pharmaceutical Holdings has been growing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the HK personal products industry has been enduring severe headwinds over the previous few years, leading to an average earnings drop of -33.43% in the most recent year. This suggests that any recent headwind the industry is experiencing, Zhongzhi Pharmaceutical Holdings is less exposed compared to its peers.

What does this mean?

Zhongzhi Pharmaceutical Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company.

I suggest you continue to research Zhongzhi Pharmaceutical Holdings to get a more holistic view of the stock by looking at: