After looking at CMBC Capital Holdings Limited’s (SEHK:1141) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for CMBC Capital Holdings
How 1141 fared against its long-term earnings performance and its industry
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to analyze different companies on a similar basis, using the most relevant data points. For CMBC Capital Holdings, its most recent bottom-line is -HK$975.7M, which, in comparison to last year’s level, has become less negative. Since these figures are somewhat nearsighted, I’ve computed an annualized five-year figure for CMBC Capital Holdings’s earnings, which stands at -HK$349.6M. This means that, CMBC Capital Holdings has historically performed better than recently, despite the fact that it seems like earnings are now heading back in the right direction again.
Additionally, we can analyze CMBC Capital 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 last couple of years has been negative at -32.77%. The key to profitability here is to make sure the company’s cost growth is well-managed. Scanning growth from a sector-level, the HK capital markets industry has been relatively flat in terms of earnings growth over the previous twelve months, settling down from a robust 14.23% over the previous five years. This shows that although CMBC Capital Holdings is currently unprofitable, any near-term headwind the industry is experiencing, CMBC Capital Holdings is relatively better-cushioned than its peers.
What does this mean?
CMBC Capital Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most valuable step is to assess company-specific issues CMBC Capital Holdings may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research CMBC Capital Holdings to get a more holistic view of the stock by looking at: