For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Henderson Land Development Company Limited (HKG:12) useful as an attempt to give more color around how Henderson Land Development is currently performing.
Were 12’s earnings stronger than its past performances and the industry?
12’s trailing twelve-month earnings (from 31 December 2018) of HK$31b has increased by 2.4% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 16%, indicating the rate at which 12 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Henderson Land Development has fallen short of achieving a 20% return on equity (ROE), recording 9.9% instead. However, its return on assets (ROA) of 7.0% exceeds the HK Real Estate industry of 3.8%, indicating Henderson Land Development has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Henderson Land Development’s debt level, has declined over the past 3 years from 2.5% to 2.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 23% to 28% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Henderson Land Development to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 12’s future growth? Take a look at our free research report of analyst consensus for 12’s outlook.
- Financial Health: Are 12’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 31 December 2018. 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.