Today I will examine China All Access (Holdings) Limited’s (HKG:633) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of 633’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.
Were 633’s earnings stronger than its past performances and the industry?633’s trailing twelve-month earnings (from 31 December 2017) of CN¥228.78m has more than doubled from CN¥75.41m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.12%, indicating the rate at which 633 is growing has accelerated. What’s enabled this growth? Let’s see if it is merely because of an industry uplift, or if China All Access (Holdings) has experienced some company-specific growth.
Over the last couple of years, China All Access (Holdings) top-line expansion has overtaken earnings and the growth rate of expenses. Though this has caused a margin contraction, it has lessened China All Access (Holdings)’s earnings contraction. Scanning growth from a sector-level, the HK communications industry has been growing its average earnings by double-digit 43.89% over the prior year, and a more subdued 7.79% over the last five years. This growth is a median of profitable companies of 16 Communications companies in HK including Zioncom Holdings, Comba Telecom Systems Holdings and On Real International Holdings. This means that any uplift the industry is profiting from, China All Access (Holdings) is capable of amplifying this to its advantage.In terms of returns from investment, China All Access (Holdings) has not invested its equity funds well, leading to a 5.82% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 4.82% is below the HK Communications industry of 6.43%, indicating China All Access (Holdings)’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China All Access (Holdings)’s debt level, has increased over the past 3 years from 4.25% to 5.62%.
What does this mean?
China All Access (Holdings)’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 All Access (Holdings) gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research China All Access (Holdings) to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 633’s future growth? Take a look at our free research report of analyst consensus for 633’s outlook.
- Financial Health: Is 633’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.
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 email@example.com.