Galaxy Entertainment Group Limited (HKG:27): Should The Recent Earnings Drop Worry You?
When Galaxy Entertainment Group Limited (SEHK:27) released its most recent earnings update (31 December 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Galaxy Entertainment Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 27 has performed.
See our latest analysis for Galaxy Entertainment Group
Did 27 perform worse than its track record and industry?
27's trailing twelve-month earnings (from 31 December 2019) of HK$13b has declined by -3.4% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 19%, indicating the rate at which 27 is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Galaxy Entertainment Group has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 12% exceeds the HK Hospitality industry of 3.9%, indicating Galaxy Entertainment Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Galaxy Entertainment Group’s debt level, has increased over the past 3 years from 13% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 2.3% to 0.9% over the past 5 years.
What does this mean?
Though Galaxy Entertainment Group's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Galaxy Entertainment Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 27’s future growth? Take a look at our free research report of analyst consensus for 27’s outlook.
Financial Health: Are 27’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 editorial-team@simplywallst.com. 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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