How Computime Group Limited’s (HKG:320) Earnings Growth Stacks Up Against The Industry
When Computime Group Limited (HKG:320) released its most recent earnings update (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Computime Group’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 320 actually performed well. Below is a quick commentary on how I see 320 has performed.
See our latest analysis for Computime Group
Did 320’s recent performance beat its trend and industry?
320’s trailing twelve-month earnings (from 31 March 2018) of HK$126.40m has declined by -0.036% 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 27.22%, indicating the rate at which 320 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the whole industry is feeling the heat.
Over the past couple of years, revenue growth has not been able to catch up, which indicates that Computime Group’s bottom line has been propelled by unmaintainable cost-reductions. Looking at growth from a sector-level, the HK electronic industry has been growing, albeit, at a unexciting single-digit rate of 9.24% over the prior twelve months, and a substantial 13.05% over the past five years. This growth is a median of profitable companies of 24 Electronic companies in HK including Truly International Holdings, Prime Intelligence Solutions Group and Ju Teng International Holdings. This suggests that whatever tailwind the industry is enjoying, Computime Group has not been able to gain as much as its average peer.
In terms of returns from investment, Computime Group has fallen short of achieving a 20% return on equity (ROE), recording 9.35% instead. However, its return on assets (ROA) of 6.11% exceeds the HK Electronic industry of 5.68%, indicating Computime Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Computime Group’s debt level, has increased over the past 3 years from 9.02% to 11.67%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 28.80% to 18.55% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I suggest you continue to research Computime Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 320’s future growth? Take a look at our free research report of analyst consensus for 320’s outlook.
Financial Health: Are 320’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 March 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
