Measuring Guangdong Investment Limited's (SEHK:270) 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 270's recent performance announced on 30 September 2019 and compare these figures to its historical trend and industry movements.
Have 270's earnings improved against past performances and the industry?
270's trailing twelve-month earnings (from 30 September 2019) of HK$4.9b has declined by -0.3% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 5.3%, indicating the rate at which 270 is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, Guangdong Investment has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 5.9% exceeds the HK Water Utilities industry of 4.7%, indicating Guangdong Investment has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Guangdong Investment’s debt level, has declined over the past 3 years from 10% to 9.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14% to 17% over the past 5 years.
What does this mean?
Though Guangdong Investment's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. You should continue to research Guangdong Investment to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 270’s future growth? Take a look at our free research report of analyst consensus for 270’s outlook.
- Financial Health: Are 270’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 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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