After looking at China State Construction International Holdings Limited's (SEHK:3311) latest earnings update (31 December 2019), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Did 3311 beat its long-term earnings growth trend and its industry?
3311's trailing twelve-month earnings (from 31 December 2019) of HK$5.7b has jumped 26% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.9%, indicating the rate at which 3311 is growing has accelerated. What's enabled this growth? Let's see whether it is merely a result of industry tailwinds, or if China State Construction International Holdings has experienced some company-specific growth.
In terms of returns from investment, China State Construction International Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.5% is below the HK Construction industry of 5.6%, indicating China State Construction International Holdings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China State Construction International Holdings’s debt level, has declined over the past 3 years from 10% to 8.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 74% to 100% over the past 5 years.
What does this mean?
Though China State Construction International Holdings's past data is helpful, it is only one aspect of my investment thesis. While China State Construction International Holdings has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research China State Construction International Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3311’s future growth? Take a look at our free research report of analyst consensus for 3311’s outlook.
- Financial Health: Are 3311’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 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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