Does Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited’s (HKG:1938) Earnings Growth Make It An Outperformer?

When Chu Kong Petroleum and Natural Gas Steel Pipe Holdings Limited (SEHK:1938) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Chu Kong Petroleum and Natural Gas Steel Pipe Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 1938 has performed. View our latest analysis for Chu Kong Petroleum and Natural Gas Steel Pipe Holdings

How 1938 fared against its long-term earnings performance and its industry

I look at 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 method enables me to analyze many different companies in a uniform manner using the latest information. For Chu Kong Petroleum and Natural Gas Steel Pipe Holdings, its latest trailing-twelve-month earnings is -CN¥872.22M, which compared to the previous year’s figure, has become less negative. Given that these figures are somewhat nearsighted, I have computed an annualized five-year figure for Chu Kong Petroleum and Natural Gas Steel Pipe Holdings’s net income, which stands at -CN¥261.92M. This shows that, Chu Kong Petroleum and Natural Gas Steel Pipe Holdings has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards to right direction again.

SEHK:1938 Income Statement Apr 11th 18
SEHK:1938 Income Statement Apr 11th 18
We can further examine Chu Kong Petroleum and Natural Gas Steel Pipe Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Chu Kong Petroleum and Natural Gas Steel Pipe Holdings has seen an annual decline in revenue of -14.87%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the HK energy services industry has been ramping up average earnings growth of 97.11% over the past twelve months, . This is a a substantial change from a volatile drop of -28.73% in the previous couple of years. This suggests that any uplift the industry is deriving benefit from, Chu Kong Petroleum and Natural Gas Steel Pipe Holdings has not been able to realize the gains unlike its industry peers.

What does this mean?

Chu Kong Petroleum and Natural Gas Steel Pipe Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Chu Kong Petroleum and Natural Gas Steel Pipe Holdings may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research Chu Kong Petroleum and Natural Gas Steel Pipe Holdings to get a better picture of the stock by looking at:

  • 1. Financial Health: Is 1938’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.
  • 2. 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.