U.S. Markets open in 6 hrs 37 mins

Was China Communications Services Corporation Limited's (HKG:552) Earnings Growth Better Than The Industry's?

Simply Wall St

When China Communications Services Corporation Limited's (HKG:552) announced its latest earnings (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were China Communications Services's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 552 actually performed well. Below is a quick commentary on how I see 552 has performed.

Check out our latest analysis for China Communications Services

How Did 552's Recent Performance Stack Up Against Its Past?

552's trailing twelve-month earnings (from 31 December 2018) of CN¥2.9b has increased by 6.9% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.4%, indicating the rate at which 552 is growing has accelerated. What's enabled this growth? Let's see whether it is solely attributable to industry tailwinds, or if China Communications Services has seen some company-specific growth.

SEHK:552 Income Statement, August 14th 2019

In terms of returns from investment, China Communications Services has fallen short of achieving a 20% return on equity (ROE), recording 8.9% instead. Furthermore, its return on assets (ROA) of 3.1% is below the HK Construction industry of 5.6%, indicating China Communications Services's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China Communications Services’s debt level, has declined over the past 3 years from 9.9% to 8.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.5% to 1.4% over the past 5 years.

What does this mean?

Though China Communications Services's past data is helpful, it is only one aspect of my investment thesis. While China Communications Services has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research China Communications Services to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 552’s future growth? Take a look at our free research report of analyst consensus for 552’s outlook.
  2. Financial Health: Are 552’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.
  3. 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 2018. 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 editorial-team@simplywallst.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. Thank you for reading.