After reading Computer And Technologies Holdings Limited’s (HKG:46) latest earnings update (31 December 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 46 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for Computer And Technologies Holdings
How Did 46’s Recent Performance Stack Up Against Its Past?46’s trailing twelve-month earnings (from 31 December 2017) of HK$54.33m has increased by 7.92% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -0.044%, indicating the rate at which 46 is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is merely because of industry tailwinds, or if Computer And Technologies Holdings has experienced some company-specific growth.
Over the past few years, even though bottom-line growth has seen a waning, top-line growth has fallen much faster, bringing about a margin expansion and Computer And Technologies Holdings still maintaining profitability. Viewing growth from a sector-level, the HK it industry has been relatively flat in terms of earnings growth over the previous couple of years. This means whatever recent headwind the industry is facing, Computer And Technologies Holdings is less exposed compared to its peers.In terms of returns from investment, Computer And Technologies Holdings has not invested its equity funds well, leading to a 11.99% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 8.19% exceeds the HK IT industry of 7.60%, indicating Computer And Technologies Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Computer And Technologies Holdings’s debt level, has increased over the past 3 years from 11.29% to 11.94%.
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. I suggest you continue to research Computer And Technologies Holdings to get a more holistic view of the stock by looking at:
- Financial Health: Is 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.
- Valuation: What is 46 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 46 is currently mispriced by the market.
- 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.