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 Texhong Textile Group Limited (HKG:2678) useful as an attempt to give more color around how Texhong Textile Group is currently performing.

View our latest analysis for Texhong Textile Group

How Well Did 2678 Perform?

2678’s trailing twelve-month earnings (from 31 December 2018) of CN¥1.2b has increased by 1.0% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 14%, indicating the rate at which 2678 is growing has slowed down. To understand what’s happening, let’s take a look at what’s going on with margins and if the whole industry is feeling the heat.

In terms of returns from investment, Texhong Textile Group has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 8.9% exceeds the HK Luxury industry of 6.1%, indicating Texhong Textile Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Texhong Textile Group’s debt level, has declined over the past 3 years from 17% to 16%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 91% to 104% over the past 5 years.

What does this mean?

Texhong Textile Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Texhong Textile Group to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for 2678’s future growth? Take a look at our free research report of analyst consensus for 2678’s outlook.

2. Financial Health: Are 2678’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.

3. 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.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.