Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess ChinaCache International Holdings Ltd’s (NASDAQ:CCIH) 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. See our latest analysis for ChinaCache International Holdings
Was CCIH’s recent earnings decline worse than the long-term trend and the industry?
I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to analyze various companies on a similar basis, using new information. For ChinaCache International Holdings, its most recent earnings (trailing twelve month) is -CN¥791.82M, which, in comparison to the previous year’s level, has become more negative. Since these figures may be relatively short-term thinking, I have calculated an annualized five-year figure for ChinaCache International Holdings’s earnings, which stands at -CN¥157.65M. This doesn’t look much better, since earnings seem to have steadily been getting more and more negative over time.
We can further examine ChinaCache International Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade ChinaCache International Holdings’s top-line has risen by 10.46% on average, implying that the company is in a high-growth period with expenses shooting ahead of revenues, leading to annual losses. Viewing growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 14.78% over the past year, and 16.35% over the past five. This suggests that whatever tailwind the industry is deriving benefit from, ChinaCache International Holdings has not been able to leverage it as much as its average peer.
What does this mean?
ChinaCache International Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most valuable step is to assess company-specific issues ChinaCache International Holdings may be facing and whether management guidance has steadily been met in the past. I recommend you continue to research ChinaCache International Holdings to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is CCIH’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.
- 2. 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 30 June 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.