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Measuring China XD Plastics Company Limited’s (NASDAQ:CXDC) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CXDC’s recent performance announced on 30 September 2017 and compare these figures to its historical trend and industry movements. Check out our latest analysis for China XD Plastics
How Well Did CXDC Perform?
I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to assess different stocks on a similar basis, using the latest information. For China XD Plastics, its latest earnings (trailing twelve month) is US$66.71M, which, relative to the prior year’s figure, has fallen by -2.85%. Since these values are fairly short-term, I have computed an annualized five-year figure for CXDC’s net income, which stands at US$70.65M This doesn’t seem to paint a better picture, as earnings seem to have consistently been falling over the longer term.
Why is this? Well, let’s take a look at what’s going on with margins and if the whole industry is experiencing the hit as well. Revenue growth over the last few years, has been positive, however, earnings growth has failed to keep up meaning China XD Plastics has been ramping up its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US auto components industry has been growing, albeit, at a muted single-digit rate of 9.87% over the previous twelve months, and a substantial 12.09% over the past five years. This means whatever uplift the industry is deriving benefit from, China XD Plastics has not been able to gain as much as its industry peers.
What does this mean?
China XD Plastics’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that face a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. You should continue to research China XD Plastics to get a more holistic view of the stock by looking at:
1. Financial Health: Is CXDC’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.
2. 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 September 2017. 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.