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.
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:
- 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.
- 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.
- 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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