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After looking at China Telecom Corporation Limited's (HKG:728) latest earnings update (31 March 2019), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
How Well Did 728 Perform?
728's trailing twelve-month earnings (from 31 March 2019) of CN¥21b has jumped 13% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 2.2%, indicating the rate at which 728 is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is merely because of an industry uplift, or if China Telecom has experienced some company-specific growth.
In terms of returns from investment, China Telecom has fallen short of achieving a 20% return on equity (ROE), recording 6.2% instead. Furthermore, its return on assets (ROA) of 3.4% is below the HK Telecom industry of 6.4%, indicating China Telecom's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China Telecom’s debt level, has declined over the past 3 years from 6.8% to 6.3%.
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? I suggest you continue to research China Telecom to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 728’s future growth? Take a look at our free research report of analyst consensus for 728’s outlook.
- Financial Health: Are 728’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 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 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.