Nanfang Communication Holdings Limited’s (HKG:1617) Earnings Grew 30.29%, Did It Beat Long-Term Trend?
Examining Nanfang Communication Holdings Limited’s (HKG:1617) 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 1617’s latest performance announced on 31 December 2017 and compare these figures to its longer term trend and industry movements. Check out our latest analysis for Nanfang Communication Holdings
How Well Did 1617 Perform?
1617’s trailing twelve-month earnings (from 31 December 2017) of HK$130.33m has jumped 30.29% 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 35.54%, indicating the rate at which 1617 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the entire industry is facing the same headwind.
In the past couple of years, revenue growth has fallen behind which implies that Nanfang Communication Holdings’s bottom line has been propelled by unsustainable cost-reductions. Eyeballing growth from a sector-level, the HK communications industry has been growing its average earnings by double-digit 44.19% in the prior twelve months, and a less exciting 6.17% over the past five. This suggests that whatever uplift the industry is benefiting from, Nanfang Communication Holdings has not been able to gain as much as its average peer.
In terms of returns from investment, Nanfang Communication Holdings has not invested its equity funds well, leading to a 16.68% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 10.57% exceeds the HK Communications industry of 6.43%, indicating Nanfang Communication Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Nanfang Communication Holdings’s debt level, has increased over the past 3 years from 10.21% to 18.52%.
What does this mean?
Though Nanfang Communication Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Nanfang Communication Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Nanfang Communication Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 1617’s future growth? Take a look at our free research report of analyst consensus for 1617’s outlook.
Financial Health: Is 1617’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 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.
