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Does Tan Chong International Limited’s (HKG:693) Recent Track Record Look Strong?

In this commentary, I will examine Tan Chong International Limited’s (HKG:693) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the retail distributors industry performed. As an investor, I find it beneficial to assess 693’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Tan Chong International

Were 693’s earnings stronger than its past performances and the industry?

693’s trailing twelve-month earnings (from 31 December 2017) of HK$501.92m has more than doubled from HK$191.07m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -19.41%, indicating the rate at which 693 is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is solely a result of industry tailwinds, or if Tan Chong International has seen some company-specific growth.

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In the last few years, Tan Chong International top-line expansion has outstripped earnings and the growth rate of expenses. Though this resulted in a margin contraction, it has softened Tan Chong International’s earnings contraction. Eyeballing growth from a sector-level, the HK retail distributors industry has been

SEHK:693 Income Statement June 25th 18
SEHK:693 Income Statement June 25th 18

In terms of returns from investment, Tan Chong International has not invested its equity funds well, leading to a 4.96% return on equity (ROE), below the sensible minimum of 20%.

What does this mean?

Tan Chong International’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. I recommend you continue to research Tan Chong International to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 693’s future growth? Take a look at our free research report of analyst consensus for 693’s outlook.

  2. Financial Health: Is 693’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 31 December 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.