Was China Communications Services Corporation Limited's (HKG:552) Earnings Growth Better Than The Industry's?
After looking at China Communications Services Corporation Limited's (SEHK:552) latest earnings announcement (31 December 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Check out our latest analysis for China Communications Services
Could 552 beat the long-term trend and outperform its industry?
552's trailing twelve-month earnings (from 31 December 2019) of CN¥3.0b has increased by 5.1% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 7.3%, indicating the rate at which 552 is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, China Communications Services has fallen short of achieving a 20% return on equity (ROE), recording 8.6% instead. Furthermore, its return on assets (ROA) of 3.6% is below the HK Construction industry of 5.3%, indicating China Communications Services's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China Communications Services’s debt level, has declined over the past 3 years from 9.9% to 9.3%.
What does this mean?
China Communications Services's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. 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 China Communications Services to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 552’s future growth? Take a look at our free research report of analyst consensus for 552’s outlook.
Financial Health: Are 552’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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