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Understanding China Hongqiao Group Limited’s (SEHK:1378) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how China Hongqiao Group is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. Check out our latest analysis for China Hongqiao Group
Did 1378 beat its long-term earnings growth trend and its industry?
To account for any quarterly or half-yearly updates, 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 method allows me to assess many different companies on a more comparable basis, using new information. For China Hongqiao Group, its latest earnings (trailing twelve month) is CN¥5.05B, which, relative to the previous year’s figure, has moved up by 18.39%. Since these figures may be relatively short-term, I’ve computed an annualized five-year figure for 1378’s net income, which stands at CN¥5.31B This means that, even though earnings increased from last year’s level, over the long run, China Hongqiao Group’s earnings have been diminishing on average.
Why could this be happening? Well, let’s look at what’s occurring with margins and if the whole industry is experiencing the hit as well. Revenue growth over the past couple of years, has been positive, yet earnings growth has been deteriorating. This implies that China Hongqiao Group has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the HK metals and mining industry has been multiplying growth, more than doubling average earnings over the past twelve months, . This is a a substantial change from a volatile drop of -14.91% in the previous few years. This means in the recent industry expansion, China Hongqiao Group has not been able to reap as much as its industry peers.
What does this mean?
China Hongqiao Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are affecting the entire industry hence the high industry growth rate over the same time period. I suggest you continue to research China Hongqiao Group to get a more holistic view of the stock by looking at: