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After looking at King's Flair International (Holdings) Limited's (SEHK:6822) latest earnings announcement (30 June 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
View our latest analysis for King's Flair International (Holdings)
Was 6822's recent earnings decline indicative of a tough track record?
6822's trailing twelve-month earnings (from 30 June 2019) of HK$120m has declined by -17% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 2.1%, indicating the rate at which 6822 is growing has slowed down. Why is this? Let's examine what's going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, King's Flair International (Holdings) has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 10% exceeds the HK Consumer Durables industry of 4.9%, indicating King's Flair International (Holdings) has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for King's Flair International (Holdings)’s debt level, has declined over the past 3 years from 27% to 20%.
What does this mean?
King's Flair International (Holdings)'s track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. In some cases, companies that experience an extended period of reduction in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes King's Flair International (Holdings) and its peers a riskier investment. I suggest you continue to research King's Flair International (Holdings) to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 6822’s future growth? Take a look at our free research report of analyst consensus for 6822’s outlook.
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Financial Health: Are 6822’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.