For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Sun Art Retail Group Limited (SEHK:6808) useful as an attempt to give more color around how Sun Art Retail Group is currently performing.
Did 6808's recent earnings growth beat the long-term trend and the industry?
6808's trailing twelve-month earnings (from 31 December 2019) of CN¥2.8b has increased by 9.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.9%, indicating the rate at which 6808 is growing has accelerated. What's enabled this growth? Let's take a look at whether it is solely a result of an industry uplift, or if Sun Art Retail Group has experienced some company-specific growth.
In terms of returns from investment, Sun Art Retail Group has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 4.2% exceeds the HK Consumer Retailing industry of 3.5%, indicating Sun Art Retail Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sun Art Retail Group’s debt level, has declined over the past 3 years from 16% to 13%.
What does this mean?
Though Sun Art Retail Group'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 suggest you continue to research Sun Art Retail Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 6808’s future growth? Take a look at our free research report of analyst consensus for 6808’s outlook.
Financial Health: Are 6808’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.
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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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