Assessing Jinmao (China) Hotel Investments and Management Limited’s (HKG:6139) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess 6139’s latest performance announced on 30 June 2018 and evaluate these figures to its historical trend and industry movements.

View our latest analysis for Jinmao (China) Hotel Investments and Management

How Well Did 6139 Perform?

6139’s trailing twelve-month earnings (from 30 June 2018) of CN¥172.2m has more than halved from CN¥374.6m 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 -18.1%, indicating the rate at which 6139 is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and if the rest of the industry is feeling the heat.

Revenue growth in the past few years, has been positive, nevertheless earnings growth has been declining. This suggest that Jinmao (China) Hotel Investments and Management has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the HK hospitality industry has been growing its average earnings by double-digit 14.7% over the prior year, and a flatter -0.6% over the past half a decade. This growth is a median of profitable companies of 24 Hospitality companies in HK including Fresh Express Delivery Holdings Group, Cteh and Asia Standard Hotel Group. This suggests that, in the recent industry expansion, Jinmao (China) Hotel Investments and Management has not been able to leverage it as much as its industry peers.

In terms of returns from investment, Jinmao (China) Hotel Investments and Management has fallen short of achieving a 20% return on equity (ROE), recording 2.7% instead. Furthermore, its return on assets (ROA) of 2.5% is below the HK Hospitality industry of 4.2%, indicating Jinmao (China) Hotel Investments and Management’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Jinmao (China) Hotel Investments and Management’s debt level, has increased over the past 3 years from 0.5% to 3.2%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Generally companies that face an extended period of reduction in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and expansion. I suggest you continue to research Jinmao (China) Hotel Investments and Management to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for 6139’s future growth? Take a look at our free research report of analyst consensus for 6139’s outlook.

2. Financial Health: Are 6139’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 30 June 2018. 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.