After looking at Yuhua Energy Holdings Limited’s (SEHK:2728) latest earnings announcement (30 June 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. Check out our latest analysis for Yuhua Energy Holdings
Did 2728 beat its long-term earnings growth trend and its industry?
I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to analyze different stocks in a uniform manner using the latest information. “For Yuhua Energy Holdings, its “, most recent bottom-line is HK$64.0M, which, in comparison to the prior year’s figure, has increased by over 100%. Given that these values are somewhat myopic, I’ve calculated an annualized five-year value for Yuhua Energy Holdings’s earnings, which stands at -HK$1.0M. This means that, on average, Yuhua Energy Holdings has been able to consistently improve its earnings over the last couple of years as well.
What’s enabled this growth? Let’s see if it is only due to an industry uplift, or if Yuhua Energy Holdings has experienced some company-specific growth. The rise in earnings seems to be supported by a strong top-line increase outstripping its growth rate of expenses. Though this has led to a margin contraction, it has made Yuhua Energy Holdings more profitable. Eyeballing growth from a sector-level, the HK oil and gas industry has been growing average earnings growth of 54.48% over the prior year, . This is a a solid turnaround from a volatile drop of -4.69% in the last couple of years. This shows that, in the recent industry expansion, Yuhua Energy Holdings is able to leverage this to its advantage.
What does this mean?
Yuhua Energy Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Yuhua Energy Holdings has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Yuhua Energy Holdings to get a more holistic view of the stock by looking at: