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How Does China Gas Holdings Limited's (HKG:384) Earnings Growth Stack Up Against Industry Performance?

Simply Wall St

After reading China Gas Holdings Limited's (HKG:384) latest earnings update (31 March 2019), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether 384 has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.

View our latest analysis for China Gas Holdings

How Well Did 384 Perform?

384's trailing twelve-month earnings (from 31 March 2019) of HK$8.2b has jumped 35% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 25%, indicating the rate at which 384 is growing has accelerated. What's the driver of this growth? Let's see if it is only a result of an industry uplift, or if China Gas Holdings has seen some company-specific growth.

SEHK:384 Income Statement, August 16th 2019

In terms of returns from investment, China Gas Holdings has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.5% exceeds the HK Gas Utilities industry of 4.9%, indicating China Gas Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for China Gas Holdings’s debt level, has increased over the past 3 years from 14% to 15%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 110% to 93% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research China Gas Holdings to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for 384’s future growth? Take a look at our free research report of analyst consensus for 384’s outlook.
  2. Financial Health: Are 384’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 March 2019. 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.