Hong Kong Exchanges and Clearing Limited (HKG:388): Has Recent Earnings Growth Beaten Long-Term Trend?
Assessing Hong Kong Exchanges and Clearing Limited’s (HKG:388) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess 388’s recent performance announced on 31 March 2018 and evaluate these figures to its long-term trend and industry movements. See our latest analysis for Hong Kong Exchanges and Clearing
How Did 388’s Recent Performance Stack Up Against Its Past?
388’s trailing twelve-month earnings (from 31 March 2018) of HK$8.25b has jumped 36.30% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.98%, indicating the rate at which 388 is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is merely due to an industry uplift, or if Hong Kong Exchanges and Clearing has seen some company-specific growth.
The rise in earnings seems to be supported by a substantial top-line increase overtaking its growth rate of costs. Though this brought about a margin contraction, it has made Hong Kong Exchanges and Clearing more profitable. Looking at growth from a sector-level, the HK capital markets industry has been growing its average earnings by double-digit 15.10% over the previous twelve months, and 17.15% over the past five. This means that whatever tailwind the industry is deriving benefit from, Hong Kong Exchanges and Clearing is capable of leveraging this to its advantage.
In terms of returns from investment, Hong Kong Exchanges and Clearing has invested its equity funds well leading to a 20.50% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 2.71% is below the HK Capital Markets industry of 2.84%, indicating Hong Kong Exchanges and Clearing’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for Hong Kong Exchanges and Clearing’s debt level, has increased over the past 3 years from 20.71% to 23.18%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 37.36% to 4.67% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Hong Kong Exchanges and Clearing 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 Hong Kong Exchanges and Clearing to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 388’s future growth? Take a look at our free research report of analyst consensus for 388’s outlook.
Financial Health: Is 388’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 2018. 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.
