In this commentary, I will examine China Eco-Farming Limited’s (SEHK:8166) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the air freight and logistics industry performed. As an investor, I find it beneficial to assess 8166’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for China Eco-Farming
Did 8166 perform worse than its track record and 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 method allows me to analyze different companies on a similar basis, using new information. For China Eco-Farming, its latest trailing-twelve-month earnings is -HK$62.3M, which compared to the prior year’s level, has become more negative. Given that these values are somewhat short-term thinking, I’ve estimated an annualized five-year figure for China Eco-Farming’s net income, which stands at -HK$30.8M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.
Additionally, we can assess China Eco-Farming’s loss by looking at what’s going on in the industry as well as within the company. Initially, I want to briefly look into the line items. Revenue growth over the last couple of years has grown by 23.11%, signalling that China Eco-Farming is in a high-growth phase with expenses shooting ahead of high top-line growth rates, leading to yearly losses. Looking at growth from a sector-level, the HK air freight and logistics industry has been enduring some headwinds over the previous couple of years, leading to an average earnings drop of -22.19% in the most recent year. This means whatever recent the industry is experiencing, it’s hitting China Eco-Farming harder than its peers.
What does this mean?
China Eco-Farming’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues China Eco-Farming may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research China Eco-Farming to get a better picture of the stock by looking at: