When China Construction Bank Corporation (SEHK:939) announced its most recent earnings (30 September 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how China Construction Bank performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 939 has performed. Check out our latest analysis for China Construction Bank
Did 939’s recent EPS Growth beat the long-term trend and the industry?
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to assess many different companies on a similar basis, using the latest information. For China Construction Bank, the most recent twelve-month earnings is CN¥237,800.0M, which compared to last year’s level, has increased by a fairly unexciting 3.20%. Since these values may be fairly nearsighted, I’ve created an annualized five-year figure for 939’s net income, which stands at CN¥206,657.6M. This shows that, generally, China Construction Bank has been able to increasingly improve its earnings over the last few years as well.
How has it been able to do this? Let’s see whether it is merely attributable to industry tailwinds, or if China Construction Bank has experienced some company-specific growth. Over the past couple of years, China Construction Bank increased its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the HK banks industry has been growing, albeit, at a subdued single-digit rate of 4.21% in the previous year, and 6.05% over the past five. This shows that whatever near-term headwind the industry is enduring, it’s hitting China Construction Bank harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as China Construction Bank gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research China Construction Bank to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for 939’s future growth? Take a look at our free research report of analyst consensus for 939’s outlook.
2. Financial Health: Is 939’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass 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.