China Overseas Land & Investment Limited (HKG:688): Has Recent Earnings Growth Beaten Long-Term Trend?
After looking at China Overseas Land & Investment Limited's (SEHK:688) latest earnings update (31 December 2019), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Check out our latest analysis for China Overseas Land & Investment
Did 688 beat its long-term earnings growth trend and its industry?
688's trailing twelve-month earnings (from 31 December 2019) of CN¥42b has increased by 5.5% 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 11%, indicating the rate at which 688 is growing has slowed down. What could be happening here? Well, let's examine what's occurring with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, China Overseas Land & Investment has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 5.6% exceeds the HK Real Estate industry of 2.9%, indicating China Overseas Land & Investment has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for China Overseas Land & Investment’s debt level, has increased over the past 3 years from 11% to 11%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 100% to 66% over the past 5 years.
What does this mean?
China Overseas Land & Investment's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research China Overseas Land & Investment to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 688’s future growth? Take a look at our free research report of analyst consensus for 688’s outlook.
Financial Health: Are 688’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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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