Was Changmao Biochemical Engineering Company Limited's (HKG:954) Earnings Growth Better Than The Industry's?

Assessing Changmao Biochemical Engineering Company Limited's (SEHK:954) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess 954's latest performance announced on 31 December 2019 and evaluate these figures to its historical trend and industry movements.

Check out our latest analysis for Changmao Biochemical Engineering

How Well Did 954 Perform?

954's trailing twelve-month earnings (from 31 December 2019) of CN¥58m has jumped 15% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.2%, indicating the rate at which 954 is growing has accelerated. What's the driver of this growth? Well, let’s take a look at if it is solely owing to an industry uplift, or if Changmao Biochemical Engineering has seen some company-specific growth.

In terms of returns from investment, Changmao Biochemical Engineering has fallen short of achieving a 20% return on equity (ROE), recording 8.7% instead. However, its return on assets (ROA) of 7.9% exceeds the HK Chemicals industry of 6.6%, indicating Changmao Biochemical Engineering has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Changmao Biochemical Engineering’s debt level, has increased over the past 3 years from 4.9% to 9.6%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 17% to 3.1% over the past 5 years.

What does this mean?

Though Changmao Biochemical Engineering's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Changmao Biochemical Engineering gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Changmao Biochemical Engineering to get a more holistic view of the stock by looking at:

1. Financial Health: Are 954’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. Valuation: What is 954 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 954 is currently mispriced by the market.
3. 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.

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. Thank you for reading.