After looking at China Huarong Asset Management Co Ltd’s (SEHK:2799) latest earnings update (30 June 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. 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 an important aspect. In this article I briefly touch on my key findings. See our latest analysis for China Huarongset Management
Did 2799’s recent EPS Growth beat the long-term trend and the industry?
For the purpose of this commentary, I like to use data from the most recent 12 months, 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 method enables me to examine various companies on a similar basis, using the latest information. For China Huarongset Management, the latest twelve-month earnings is CN¥22,195.9M, which, in comparison to last year’s level, has risen by 27.53%. Since these figures may be relatively short-term thinking, I have estimated an annualized five-year value for China Huarongset Management’s earnings, which stands at CN¥12,694.4M. This shows that, generally, China Huarongset Management has been able to gradually improve its net income over the last couple of years as well.
What’s enabled this growth? Let’s take a look at if it is merely due to industry tailwinds, or if China Huarongset Management has seen some company-specific growth. The rise in earnings seems to be supported by a solid top-line increase beating its growth rate of expenses. Though this resulted in a margin contraction, it has made China Huarongset Management more profitable. Inspecting growth from a sector-level, the HK capital markets industry has been relatively flat in terms of earnings growth in the past twelve months, settling down from a solid 14.23% over the past five years. This suggests that whatever near-term headwind the industry is experiencing, China Huarongset Management is relatively better-cushioned than its peers.
What does this mean?
Though China Huarongset Management’s past data is helpful, it is only one aspect of my investment thesis. While China Huarongset Management has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research China Huarongset Management to get a more holistic view of the stock by looking at: