When China Renewable Energy Investment Limited (SEHK:987) released its most recent earnings update (31 December 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well China Renewable Energy Investment has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see 987 has performed.
Did 987 perform worse than its track record and industry?
987's trailing twelve-month earnings (from 31 December 2019) of HK$57m has declined by -7.8% 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 12%, indicating the rate at which 987 is growing has slowed down. Why could this be happening? Let's examine what's occurring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, China Renewable Energy Investment has fallen short of achieving a 20% return on equity (ROE), recording 3.3% instead. Furthermore, its return on assets (ROA) of 2.9% is below the HK Renewable Energy industry of 4.3%, indicating China Renewable Energy Investment's are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Renewable Energy Investment’s debt level, has increased over the past 3 years from 1.1% to 2.0%.
What does this mean?
China Renewable Energy Investment's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research China Renewable Energy Investment to get a better picture of the stock by looking at:
- Financial Health: Are 987’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.
- Valuation: What is 987 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 987 is currently mispriced by the market.
- 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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