Examining how Shanghai Electric Group Company Limited (HKG:2727) is performing as a company requires looking at more than just a years' earnings. Below, I will run you through a simple sense check to build perspective on how Shanghai Electric Group is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its electrical industry peers.
Were 2727's earnings stronger than its past performances and the industry?
2727's trailing twelve-month earnings (from 31 March 2019) of CN¥3.1b has jumped 12% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 4.9%, indicating the rate at which 2727 is growing has accelerated. What's the driver of this growth? Let's see whether it is merely owing to an industry uplift, or if Shanghai Electric Group has seen some company-specific growth.
In terms of returns from investment, Shanghai Electric Group has fallen short of achieving a 20% return on equity (ROE), recording 7.1% instead. Furthermore, its return on assets (ROA) of 1.3% is below the HK Electrical industry of 4.0%, indicating Shanghai Electric Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Shanghai Electric Group’s debt level, has declined over the past 3 years from 5.4% to 5.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 15% to 51% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Shanghai Electric Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Shanghai Electric Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 2727’s future growth? Take a look at our free research report of analyst consensus for 2727’s outlook.
- Financial Health: Are 2727’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 2019. This may not be consistent with full year annual report figures.
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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. Thank you for reading.