When Bank of Communications Co Ltd. (SEHK:3328) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Bank of Communications has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see 3328 has performed. See our latest analysis for Bank of Communications
Did 3328’s recent earnings growth beat the long-term trend and the industry?
I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend allows me to examine many different companies on a similar basis, using the most relevant data points. For Bank of Communications, its most recent trailing-twelve-month earnings is CN¥68.30B, which, in comparison to the prior year’s figure, has grown by a fairly subdued 2.58%. Given that these values are relatively nearsighted, I’ve estimated an annualized five-year value for 3328’s earnings, which stands at CN¥62.28B This means on average, Bank of Communications has been able to consistently improve its earnings over the last couple of years as well.What’s the driver of this growth? Let’s see whether it is only attributable to industry tailwinds, or if Bank of Communications has seen some company-specific growth. The ascend in earnings seems to be supported by a strong top-line increase outstripping its growth rate of costs. Though this brought about a margin contraction, it has made Bank of Communications more profitable. Scanning growth from a sector-level, the HK banks industry has been growing, albeit, at a subdued single-digit rate of 6.72% over the past twelve months, and 9.03% over the last five years. This means any tailwind the industry is benefiting from, Bank of Communications has not been able to realize the gains unlike its industry peers.
What does this mean?
Bank of Communications’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Bank of Communications has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Bank of Communications to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3328’s future growth? Take a look at our free research report of analyst consensus for 3328’s outlook.
- Financial Health: Is 3328’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.