After reading Emperor Entertainment Hotel Limited’s (SEHK:296) most recent earnings announcement (30 September 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Emperor Entertainment Hotel’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
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Did 296 beat its long-term earnings growth trend and its industry?
296’s trailing twelve-month earnings (from 30 September 2019) of HK$416m has increased by 2.9% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.4%, indicating the rate at which 296 is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is merely owing to an industry uplift, or if Emperor Entertainment Hotel has experienced some company-specific growth.
In terms of returns from investment, Emperor Entertainment Hotel has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. However, its return on assets (ROA) of 6.5% exceeds the HK Hospitality industry of 4.7%, indicating Emperor Entertainment Hotel has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Emperor Entertainment Hotel’s debt level, has declined over the past 3 years from 7.1% to 5.0%.
What does this mean?
Emperor Entertainment Hotel’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. I suggest you continue to research Emperor Entertainment Hotel to get a better picture of the stock by looking at:
- Financial Health: Are 296’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.
- Valuation: What is 296 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 296 is currently mispriced by the market.
- 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 September 2019. This may not be consistent with full year annual report figures.