For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at China State Construction International Holdings Limited's (HKG:3311) 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.
Despite a decline, did 3311 underperform the long-term trend and the industry?
3311's trailing twelve-month earnings (from 31 December 2018) of HK$4.5b has declined by -18% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 12%, indicating the rate at which 3311 is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, China State Construction International Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.4% is below the HK Construction industry of 5.6%, indicating China State Construction International Holdings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for China State Construction International Holdings’s debt level, has declined over the past 3 years from 9.9% to 8.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 79% to 95% over the past 5 years.
What does this mean?
China State Construction 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 are profitable, but have unpredictable earnings, can have many factors affecting its business. I suggest you continue to research China State Construction International Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 3311’s future growth? Take a look at our free research report of analyst consensus for 3311’s outlook.
- Financial Health: Are 3311’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 2018. 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.