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In this commentary, I will examine Henderson Land Development Company Limited's (HKG:12) latest earnings update (31 December 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the real estate industry performed. As an investor, I find it beneficial to assess 12’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did 12's recent earnings growth beat the long-term trend and the industry?
12's trailing twelve-month earnings (from 31 December 2018) of HK$31b has increased by 1.1% 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 16%, indicating the rate at which 12 is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Henderson Land Development has fallen short of achieving a 20% return on equity (ROE), recording 9.9% instead. However, its return on assets (ROA) of 7.2% exceeds the HK Real Estate industry of 3.2%, indicating Henderson Land Development has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Henderson Land Development’s debt level, has increased over the past 3 years from 2.5% to 2.6%.
What does this mean?
Henderson Land Development's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Henderson Land Development has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Henderson Land Development to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 12’s future growth? Take a look at our free research report of analyst consensus for 12’s outlook.
- Financial Health: Are 12’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 December 2018. 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.