Today I will take a look at China Railway Signal & Communication Corporation Limited’s (HKG:3969) most recent earnings update (31 December 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the electronic industry performed. As an investor, I find it beneficial to assess 3969’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
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How Well Did 3969 Perform?
3969’s trailing twelve-month earnings (from 31 December 2018) of CN¥3.4b has increased by 3.6% 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 15%, indicating the rate at which 3969 is growing has slowed down. To understand what’s happening, let’s examine what’s occurring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, China Railway Signal & Communication has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 4.2% is below the HK Electronic industry of 5.1%, indicating China Railway Signal & Communication’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Railway Signal & Communication’s debt level, has increased over the past 3 years from 12% to 13%.
What does this mean?
China Railway Signal & Communication’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as China Railway Signal & Communication gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research China Railway Signal & Communication to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3969’s future growth? Take a look at our free research report of analyst consensus for 3969’s outlook.
- Financial Health: Are 3969’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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