When China Aerospace International Holdings Limited’s (HKG:31) announced its latest earnings (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were China Aerospace International Holdings’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 31 actually performed well. Below is a quick commentary on how I see 31 has performed.
Despite a decline, did 31 underperform the long-term trend and the industry?
31’s trailing twelve-month earnings (from 31 December 2018) of HK$404m has declined by -17% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -1.8%, indicating the rate at which 31 is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, China Aerospace International Holdings has fallen short of achieving a 20% return on equity (ROE), recording 5.7% instead. Furthermore, its return on assets (ROA) of 3.2% is below the HK Electronic industry of 5.0%, indicating China Aerospace International Holdings’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Aerospace International Holdings’s debt level, has increased over the past 3 years from 1.5% to 3.5%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 25% to 16% over the past 5 years.
What does this mean?
China Aerospace International Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that experience a drawn out period of reduction in earnings are going through some sort of reinvestment phase Though if the whole industry is struggling to grow over time, it may be a indicator of a structural shift, which makes China Aerospace International Holdings and its peers a riskier investment. I suggest you continue to research China Aerospace International Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 31’s future growth? Take a look at our free research report of analyst consensus for 31’s outlook.
- Financial Health: Are 31’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.
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