Measuring BAIC Motor Corporation Limited's (SEHK:1958) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 1958's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.
How Did 1958's Recent Performance Stack Up Against Its Past?
1958's trailing twelve-month earnings (from 30 June 2019) of CN¥3.5b has declined by -14% 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 -0.9%, indicating the rate at which 1958 is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, BAIC Motor has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 1.8% is below the HK Auto industry of 3.5%, indicating BAIC Motor's are utilized less efficiently. Though, its return on capital (ROC), which also accounts for BAIC Motor’s debt level, has increased over the past 3 years from 8.8% to 25%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 70% to 42% over the past 5 years.
What does this mean?
BAIC Motor's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Typically companies that endure a drawn out period of decline in earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes BAIC Motor and its peers a higher risk investment. You should continue to research BAIC Motor to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1958’s future growth? Take a look at our free research report of analyst consensus for 1958’s outlook.
- Financial Health: Are 1958’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 30 June 2019. This may not be consistent with full year annual report figures.
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