Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at KNK Holdings Limited’s (SEHK:8039) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for KNK Holdings

Could 8039 beat the long-term trend and outperform its industry?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to assess different companies on a more comparable basis, using the most relevant data points. For KNK Holdings, its most recent bottom-line (trailing twelve month) is HK$12.57M, which, against the prior year’s figure, has risen by 28.04%. Since these values are relatively short-term thinking, I have calculated an annualized five-year figure for KNK Holdings’s net income, which stands at HK$8.63M This suggests that, on average, KNK Holdings has been able to gradually grow its profits over the last few years as well.

What’s enabled this growth? Let’s see whether it is only a result of an industry uplift, or if KNK Holdings has experienced some company-specific growth. The rise in earnings seems to be supported by a solid top-line increase overtaking its growth rate of expenses. Though this has caused a margin contraction, it has made KNK Holdings more profitable. Eyeballing growth from a sector-level, the HK professional services industry has been enduring severe headwinds in the past year, leading to an average earnings drop of -31.92%. This is a substantial change, given that the industry has been delivering a positive rate of 3.59%, on average, over the past five years. This means whatever recent headwind the industry is facing, the impact on KNK Holdings has been softer relative to its peers.

What does this mean?

Though KNK Holdings’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research KNK Holdings to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is 8039’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.

• 2. Valuation: What is 8039 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 8039 is currently mispriced by the market.

• 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 pass 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.