In This Article:
In this commentary, I will examine Build King Holdings Limited's (SEHK:240) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the construction industry performed. As an investor, I find it beneficial to assess 240’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
View our latest analysis for Build King Holdings
Could 240 beat the long-term trend and outperform its industry?
240's trailing twelve-month earnings (from 30 June 2019) of HK$345m has increased by 3.1% 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 42%, indicating the rate at which 240 is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Build King Holdings has invested its equity funds well leading to a 32% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.1% exceeds the HK Construction industry of 5.5%, indicating Build King Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Build King Holdings’s debt level, has increased over the past 3 years from 21% to 37%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 38% to 29% over the past 5 years.
What does this mean?
Though Build King Holdings's past data is helpful, it is only one aspect of my investment thesis. While Build King Holdings has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Build King Holdings to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 240’s future growth? Take a look at our free research report of analyst consensus for 240’s outlook.
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Financial Health: Are 240’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. 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.