Today I will examine China Resources Land Limited's (SEHK:1109) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of 1109's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Could 1109 beat the long-term trend and outperform its industry?
1109's trailing twelve-month earnings (from 30 June 2019) of CN¥28b has jumped 17% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 17%, indicating the rate at which 1109 is growing has slowed down. Why could this be happening? Well, let's look at what's occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, China Resources Land has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 3.8% exceeds the HK Real Estate industry of 2.8%, indicating China Resources Land has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for China Resources Land’s debt level, has declined over the past 3 years from 13% to 12%.
What does this mean?
Though China Resources Land's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research China Resources Land to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1109’s future growth? Take a look at our free research report of analyst consensus for 1109’s outlook.
- Financial Health: Are 1109’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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If you spot an error that warrants correction, please contact the editor at email@example.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.