Measuring China Renewable Energy Investment Limited’s (HKG:987) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 987’s recent performance announced on 31 December 2018 and compare these figures to its historical trend and industry movements.
Could 987 beat the long-term trend and outperform its industry?
987’s trailing twelve-month earnings (from 31 December 2018) of HK$62m has increased by 3.2% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 26%, indicating the rate at which 987 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, China Renewable Energy Investment has fallen short of achieving a 20% return on equity (ROE), recording 3.6% instead. Furthermore, its return on assets (ROA) of 3.5% is below the HK Renewable Energy industry of 4.3%, indicating China Renewable Energy Investment’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Renewable Energy Investment’s debt level, has increased over the past 3 years from 1.0% to 1.3%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 41% to 41% over the past 5 years.
What does this mean?
Though China Renewable Energy Investment’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research China Renewable Energy Investment to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 987’s future growth? Take a look at our free research report of analyst consensus for 987’s outlook.
- Financial Health: Are 987’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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If you spot an error that warrants correction, please contact the editor at email@example.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.