Does Computer And Technologies Holdings Limited’s (HKG:46) 22% Earnings Growth Reflect The Long-Term Trend?

In this article, I will take a look at Computer And Technologies Holdings Limited’s (HKG:46) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, along with how the rest of 46’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.

See our latest analysis for Computer And Technologies Holdings

Could 46 beat the long-term trend and outperform its industry?

46’s trailing twelve-month earnings (from 30 June 2018) of HK$62m has jumped 22% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 3.3%, indicating the rate at which 46 is growing has accelerated. How has it been able to do this? Let’s see whether it is only owing to industry tailwinds, or if Computer And Technologies Holdings has experienced some company-specific growth.

SEHK:46 Income Statement Export December 19th 18
SEHK:46 Income Statement Export December 19th 18

In terms of returns from investment, Computer And Technologies Holdings has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. Furthermore, its return on assets (ROA) of 8.5% is below the HK IT industry of 9.2%, indicating Computer And Technologies Holdings’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Computer And Technologies Holdings’s debt level, has increased over the past 3 years from 9.3% to 12%.

What does this mean?

Though Computer And Technologies Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Computer And Technologies Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Computer And Technologies Holdings to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 46’s future growth? Take a look at our free research report of analyst consensus for 46’s outlook.
  2. Financial Health: Are 46’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.
  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 30 June 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.