The Hong Kong and China Gas Company Limited’s (HKG:3) Earnings Grew 13%, Did It Beat Long-Term Trend?

Measuring The Hong Kong and China Gas Company Limited’s (HKG:3) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess 3’s recent performance announced on 31 December 2018 and compare these figures to its historical trend and industry movements.

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Did 3 beat its long-term earnings growth trend and its industry?

3’s trailing twelve-month earnings (from 31 December 2018) of HK$9.3b has jumped 13% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 4.8%, indicating the rate at which 3 is growing has accelerated. What’s enabled this growth? Let’s take a look at if it is merely a result of industry tailwinds, or if Hong Kong and China Gas has seen some company-specific growth.

SEHK:3 Income Statement, May 20th 2019
SEHK:3 Income Statement, May 20th 2019

In terms of returns from investment, Hong Kong and China Gas has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 7.6% exceeds the HK Gas Utilities industry of 5.1%, indicating Hong Kong and China Gas has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hong Kong and China Gas’s debt level, has increased over the past 3 years from 7.6% to 7.9%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Hong Kong and China Gas to get a more holistic view of the stock by looking at:

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