For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Shanghai Prime Machinery Company Limited (SEHK:2345) useful as an attempt to give more color around how Shanghai Prime Machinery is currently performing. View our latest analysis for Shanghai Prime Machinery

Did 2345’s recent earnings growth beat the long-term trend and the industry?

For the most up-to-date info, I 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 enables me to assess different companies on a similar basis, using the latest information. For Shanghai Prime Machinery, its latest earnings (trailing twelve month) is CN¥249.40M, which, against the prior year’s level, has moved up by 26.18%. Given that these values are somewhat nearsighted, I’ve determined an annualized five-year value for 2345’s earnings, which stands at CN¥151.43M This suggests that, generally, Shanghai Prime Machinery has been able to gradually raise its bottom line over the last few years as well.

What’s the driver of this growth? Well, let’s take a look at if it is only attributable to industry tailwinds, or if Shanghai Prime Machinery has experienced some company-specific growth. The hike in earnings seems to be driven by a strong top-line increase beating its growth rate of costs. Though this resulted in a margin contraction, it has made Shanghai Prime Machinery more profitable. Viewing growth from a sector-level, the HK machinery industry has been growing its average earnings by double-digit 22.75% in the previous year, . This is a turnaround from a volatile drop of -9.88% in the previous couple of years. This means in the recent industry expansion, Shanghai Prime Machinery is capable of amplifying this to its advantage.

What does this mean?

Shanghai Prime Machinery’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Shanghai Prime Machinery has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Shanghai Prime Machinery to get a more holistic view of the stock by looking at the areas below. Just a heads up – to access some parts of the Simply Wall St research tool you might be asked to create a free account, but it takes just one click and the information they provide is definitely worth it in my opinion.