When China Resources Beer (Holdings) Company Limited's (SEHK:291) announced its latest earnings (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were China Resources Beer (Holdings)'s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 291 actually performed well. Below is a quick commentary on how I see 291 has performed.
Was 291's recent earnings decline indicative of a tough track record?
291's trailing twelve-month earnings (from 30 June 2019) of CN¥1.3b has declined by -11% 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 4.3%, indicating the rate at which 291 is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, China Resources Beer (Holdings) has fallen short of achieving a 20% return on equity (ROE), recording 6.5% instead. However, its return on assets (ROA) of 2.8% exceeds the HK Beverage industry of 2.6%, indicating China Resources Beer (Holdings) has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for China Resources Beer (Holdings)’s debt level, has increased over the past 3 years from 6.6% to 13%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 36% to 6.3% over the past 5 years.
What does this mean?
Though China Resources Beer (Holdings)'s past data is helpful, it is only one aspect of my investment thesis. Typically companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a indicator of a structural change, which makes China Resources Beer (Holdings) and its peers a riskier investment. I recommend you continue to research China Resources Beer (Holdings) to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 291’s future growth? Take a look at our free research report of analyst consensus for 291’s outlook.
- Financial Health: Are 291’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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