When Lung Kee (Bermuda) Holdings Limited (SEHK:255) announced its most recent earnings (30 June 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Lung Kee (Bermuda) Holdings has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see 255 has performed. Check out our latest analysis for Lung Kee (Bermuda) Holdings

Commentary On 255’s Past Performance

For the purpose of this commentary, I like to use data from the most recent 12 months, 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 technique enables me to analyze different companies on a more comparable basis, using the most relevant data points. For Lung Kee (Bermuda) Holdings, its most recent bottom-line (trailing twelve month) is HK$267.4M, which compared to the prior year’s level, has risen by a non-trivial 96.44%. Given that these values may be fairly short-term, I’ve estimated an annualized five-year figure for 255’s net income, which stands at HK$191.5M. This suggests that, generally, Lung Kee (Bermuda) Holdings has been able to increasingly improve its bottom line over the last couple of years as well.

How has it been able to do this? Well, let’s take a look at if it is merely a result of an industry uplift, or if Lung Kee (Bermuda) Holdings has seen some company-specific growth. Though both top-line and bottom-line growth rates in the past few years, were, on average, negative, earnings were more so. While this has caused a margin contraction, it has moderated Lung Kee (Bermuda) Holdings’s earnings contraction. Viewing growth from a sector-level, the HK machinery industry has been growing its average earnings by double-digit 22.75% over the previous year, . This is a turnaround from a volatile drop of -9.88% in the last few years. This shows that, in the recent industry expansion, Lung Kee (Bermuda) Holdings is able to leverage this to its advantage.

What does this mean?

Though Lung Kee (Bermuda) 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? I recommend you continue to research Lung Kee (Bermuda) Holdings to get a better picture of the stock by looking at:

1. Financial Health: Is 255’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 255 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 255 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 30 June 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.