For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Jiangsu Expressway Company Limited’s (HKG:177) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
How 177 fared against its long-term earnings performance and its industry177’s trailing twelve-month earnings (from 31 March 2018) of CN¥3.73b has increased by 7.98% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.81%, indicating the rate at which 177 is growing has accelerated. How has it been able to do this? Let’s take a look at if it is solely owing to an industry uplift, or if Jiangsu Expressway has experienced some company-specific growth.
Over the last few years, Jiangsu Expressway increased its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Looking at growth from a sector-level, the HK infrastructure industry has been growing its average earnings by double-digit 20.31% in the prior twelve months, and a less exciting 5.28% over the previous five years. This growth is a median of profitable companies of 22 Infrastructure companies in HK including Dalian Port (PDA), Xinghua Port Holdings and CIG Yangtze Ports. This shows that any uplift the industry is benefiting from, Jiangsu Expressway has not been able to leverage it as much as its industry peers.In terms of returns from investment, Jiangsu Expressway has not invested its equity funds well, leading to a 13.43% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 8.05% exceeds the HK Infrastructure industry of 5.40%, indicating Jiangsu Expressway has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Jiangsu Expressway’s debt level, has declined over the past 3 years from 13.96% to 13.50%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 23.81% to 52.11% over the past 5 years.
What does this mean?
Though Jiangsu Expressway’s past data is helpful, it is only one aspect of my investment thesis. While Jiangsu Expressway has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Jiangsu Expressway to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 177’s future growth? Take a look at our free research report of analyst consensus for 177’s outlook.
- Financial Health: Are 177’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 March 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 email@example.com.