Measuring China Financial Services Holdings Limited’s (SEHK:605) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess 605’s recent performance announced on 30 June 2019 and weigh these figures against its long-term trend and industry movements.
Commentary On 605’s Past Performance
605’s trailing twelve-month earnings (from 30 June 2019) of HK$238m has declined by -13% 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 -3.2%, indicating the rate at which 605 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, China Financial Services Holdings has fallen short of achieving a 20% return on equity (ROE), recording 7.0% instead. However, its return on assets (ROA) of 6.3% exceeds the HK Consumer Finance industry of 4.1%, indicating China Financial Services Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for China Financial Services Holdings’s debt level, has declined over the past 3 years from 17% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 26% to 51% over the past 5 years.
What does this mean?
China Financial Services Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that face an extended period of decline in earnings are undergoing some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes China Financial Services Holdings and its peers a higher risk investment. I suggest you continue to research China Financial Services Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 605’s future growth? Take a look at our free research report of analyst consensus for 605’s outlook.
- Financial Health: Are 605’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 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.