Yahoo Finance Where Hebei Construction Group Corporation Limited’s (HKG:1727) Earnings Growth Stands Against Its Industry
Analyzing Hebei Construction Group Corporation Limited’s (HKG:1727) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess 1727’s recent performance announced on 30 June 2018 and compare these figures to its long-term trend and industry movements. See our latest analysis for Hebei Construction Group
Was 1727’s recent earnings decline worse than the long-term trend and the industry?
1727’s trailing twelve-month earnings (from 30 June 2018) of CN¥1.10b has declined by -5.9% 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 24.2%, indicating the rate at which 1727 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s going on with margins and if the rest of the industry is facing the same headwind. Inspecting growth from a sector-level, the HK construction industry has been enduring some headwinds over the prior year, leading to an average earnings drop of -12.1%. We note, however, that this result has been impacted by changes in the structure of the business, related to the IPO. The industry has been delivering a positive rate of 4.6%, on average, over the past five years. This growth is a median of profitable companies of 25 Construction companies in HK including Geotech Holdings, Deson Construction International Holdings and Sam Woo Construction Group. This suggests that whatever near-term headwind the industry is experiencing, the impact on Hebei Construction Group has been softer relative to its peers.
In terms of returns from investment, Hebei Construction Group has invested its equity funds well leading to a 22.0% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 1.9% is below the HK Construction industry of 5.7%, indicating Hebei Construction Group’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for Hebei Construction Group’s debt level, has increased over the past 3 years from 16.3% to 21.6%.
What does this mean?
Hebei Construction Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I suggest you continue to research Hebei Construction Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1727’s future growth? Take a look at our free research report of analyst consensus for 1727’s outlook.
Financial Health: Are 1727’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 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.
