Does CLP Holdings Limited's (HKG:2) Past Performance Indicate A Weaker Future?

When CLP Holdings Limited's (HKG:2) 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 CLP 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 2 actually performed well. Below is a quick commentary on how I see 2 has performed.

Check out our latest analysis for CLP Holdings

Commentary On 2's Past Performance

2's trailing twelve-month earnings (from 31 December 2018) of HK$14b has declined by -4.9% 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 11%, indicating the rate at which 2 is growing has slowed down. Why is this? Well, let’s take a look at what’s transpiring with margins and if the whole industry is feeling the heat.

In terms of returns from investment, CLP Holdings has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 6.6% exceeds the HK Electric Utilities industry of 6.5%, indicating CLP Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for CLP Holdings’s debt level, has increased over the past 3 years from 7.9% to 9.6%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 99% to 45% over the past 5 years.

What does this mean?

CLP Holdings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you continue to research CLP Holdings to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for 2’s future growth? Take a look at our free research report of analyst consensus for 2’s outlook.
2. Financial Health: Are 2’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.
3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.