Analyzing China Partytime Culture Holdings Limited’s (HKG:1532) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess 1532’s recent performance announced on 31 December 2017 and compare these figures to its long-term trend and industry movements.

Check out our latest analysis for China Partytime Culture Holdings

Commentary On 1532’s Past Performance

1532’s trailing twelve-month earnings (from 31 December 2017) of CN¥13.99m has more than halved from CN¥56.68m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 1.17%, indicating the rate at which 1532 is growing has slowed down. Why is this? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is facing the same headwind.

Revenue growth over the past few years, has been positive, however, earnings growth has fallen behind meaning China Partytime Culture Holdings has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the HK luxury industry has been growing its average earnings by double-digit 18.39% over the prior twelve months, . This is a change from a volatile drop of -2.91% in the past few years. This growth is a median of profitable companies of 24 Luxury companies in HK including C.BANNER INTERNATIONAL Holdings, Win Hanverky Holdings and China Fordoo Holdings. This means that, in the recent industry expansion, China Partytime Culture Holdings has not been able to gain as much as its industry peers.

In terms of returns from investment, China Partytime Culture Holdings has fallen short of achieving a 20% return on equity (ROE), recording 3.17% instead. Furthermore, its return on assets (ROA) of 3.30% is below the HK Luxury industry of 6.07%, indicating China Partytime Culture Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China Partytime Culture Holdings’s debt level, has declined over the past 3 years from 51.28% to 4.44%.

What does this mean?

Though China Partytime Culture Holdings’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that experience a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry growth and disruption. You should continue to research China Partytime Culture Holdings to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for 1532’s future growth? Take a look at our free research report of analyst consensus for 1532’s outlook.

2. Financial Health: Are 1532’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 2017. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.