For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on CNC Holdings Limited (SEHK:8356) useful as an attempt to give more color around how CNC Holdings is currently performing. View our latest analysis for CNC Holdings
Did 8356 perform worse than its track record and 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 enables me to assess various companies on a similar basis, using the latest information. For CNC Holdings, its latest earnings is -HK$93.3M, which, relative to last year’s figure, has become more negative. Since these figures are fairly short-term thinking, I have calculated an annualized five-year value for CNC Holdings’s earnings, which stands at -HK$205.2M. This shows that, though net income is negative, it has become less negative over the years.
Additionally, we can examine CNC Holdings’s loss by researching what has been happening in the industry as well as within the company. Firstly, I want to quickly look into the line items. Revenue growth over the last few years has grown by 13.38%, implying that CNC Holdings is in a high-growth phase with expenses racing ahead elevated top-line growth rates, leading to yearly losses. Eyeballing growth from a sector-level, the HK construction and engineering industry has been enduring some headwinds over the past twelve months, leading to average earnings dropping by more than half. This is a a strong change, given that the industry has been delivering a relatively flat growth rate over the past few years. This means whatever near-term headwind the industry is experiencing, it’s hitting CNC Holdings harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will occur going forward, and when. The most useful step is to examine company-specific issues CNC Holdings may be facing and whether management guidance has dependably been met in the past. You should continue to research CNC Holdings to get a better picture of the stock by looking at:
1. Financial Health: Is 8356’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.