Understanding KML Technology Group Limited’s (SEHK:8065) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how KML Technology Group is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. See our latest analysis for KML Technology Group

Was 8065 weak performance lately part of a long-term decline?

I prefer to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend allows me to analyze different stocks on a more comparable basis, using new information. KML Technology Group’s latest twelve-month earnings is HK$5.0M, which, in comparison to the prior year’s figure, has plunged by a significant -71.84%. Since these figures are fairly short-term, I’ve calculated an annualized five-year value for 8065’s earnings, which stands at HK$12.4M. This doesn’t look much better, as earnings seem to have consistently been falling over time.

What could be happening here? Let’s examine what’s going on with margins and if the rest of the industry is feeling the heat. Revenue growth in the last few years, has been positive, yet earnings growth has been deteriorating. This implies that KML Technology Group has been growing expenses, which is harming margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the HK construction and engineering industry has been enduring some headwinds over the past year, leading to average earnings dropping by more than half. This is a a substantial change, given that the industry has been delivering a relatively flat growth rate over the last couple of years. This shows that whatever near-term headwind the industry is facing, it’s hitting KML Technology Group harder than its peers.

What does this mean?

KML Technology Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that endure a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase . Although, if the entire industry is struggling to grow over time, it may be a sign of a structural change, which makes KML Technology Group and its peers a riskier investment. You should continue to research KML Technology Group to get a more holistic view of the stock by looking at: