Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at China Resources Cement Holdings Limited’s (HKG:1313) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View out our latest analysis for China Resources Cement Holdings
Could 1313 beat the long-term trend and outperform its industry?
1313’s trailing twelve-month earnings (from 31 March 2018) of HK$4.80b has more than doubled from HK$1.33b in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -6.14%, indicating the rate at which 1313 is growing has accelerated. What’s enabled this growth? Let’s see whether it is solely attributable to an industry uplift, or if China Resources Cement Holdings has experienced some company-specific growth.
Over the past couple of years, China Resources Cement Holdings top-line expansion has outstripped earnings and the growth rate of expenses. Though this has led to a margin contraction, it has softened China Resources Cement Holdings’s earnings contraction. Inspecting growth from a sector-level, the HK basic materials industry has been growing growth, more than doubling average earnings in the prior year, . This is a a substantial change from a volatile drop of -10.23% in the last few years.
In terms of returns from investment, China Resources Cement Holdings has not invested its equity funds well, leading to a 14.26% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 9.23% exceeds the HK Basic Materials industry of 5.68%, indicating China Resources Cement Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for China Resources Cement Holdings’s debt level, has increased over the past 3 years from 11.58% to 15.02%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 101.32% to 50.32% over the past 5 years.
What does this mean?
Though China Resources Cement Holdings’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research China Resources Cement Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 1313’s future growth? Take a look at our free research report of analyst consensus for 1313’s outlook.
- Financial Health: Is 1313’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.