Examining China Netcom Technology Holdings Limited’s (SEHK:8071) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 8071’s latest performance announced on 30 September 2017 and weight these figures against its longer term trend and industry movements. View our latest analysis for China Netcom Technology Holdings
Were 8071’s earnings stronger than its past performances and the industry?
I like to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess different stocks in a uniform manner using the most relevant data points. For China Netcom Technology Holdings, its most recent bottom-line (trailing twelve month) is -HK$29.6M, which, relative to last year’s level, has become less negative. Given that these figures may be somewhat nearsighted, I have computed an annualized five-year figure for 8071’s earnings, which stands at -HK$336.1M. This means although net income is negative, it has become less negative over the years.
We can further assess China Netcom Technology Holdings’s loss by researching what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the past few years has been negative at -2.13%. The key to profitability here is to make sure the company’s cost growth is well-managed. Inspecting growth from a sector-level, the HK hospitality industry has been enduring some headwinds over the last few years, leading to an average earnings drop of -8.14% in the most recent year. This means although China Netcom Technology Holdings is presently unprofitable, any near-term headwind the industry is experiencing, China Netcom Technology Holdings is less exposed compared to its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will happen in the future and when. The most insightful step is to assess company-specific issues China Netcom Technology Holdings may be facing and whether management guidance has steadily been met in the past. You should continue to research China Netcom Technology Holdings to get a better picture of the stock by looking at:
1. Financial Health: Is 8071’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.