For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Air China Limited (HKG:753) useful as an attempt to give more color around how Air China is currently performing.
Despite a decline, did 753 underperform the long-term trend and the industry?
753's trailing twelve-month earnings (from 31 March 2019) of CN¥7.4b has declined by -12% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 13%, indicating the rate at which 753 is growing has slowed down. Why is this? Well, let's look at what's going on with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Air China has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. Furthermore, its return on assets (ROA) of 3.3% is below the HK Airlines industry of 5.9%, indicating Air China's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Air China’s debt level, has declined over the past 3 years from 9.4% to 6.6%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I suggest you continue to research Air China to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 753’s future growth? Take a look at our free research report of analyst consensus for 753’s outlook.
- Financial Health: Are 753’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.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.