Assessing CNC Holdings Limited’s (SEHK:8356) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess 8356’s recent performance announced on 31 December 2017 and evaluate these figures to its long-term trend and industry movements. See our latest analysis for CNC Holdings

Was 8356’s recent earnings decline worse than the long-term trend and the industry?

For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to assess many different companies on a similar basis, using new information. For CNC Holdings, its latest earnings (trailing twelve month) is -HK$78.66M, which, in comparison to last year’s figure, has become more negative. Given that these figures are relatively myopic, I’ve created an annualized five-year value for CNC Holdings’s earnings, which stands at -HK$216.52M. This suggests that, although net income is negative, it has become less negative over the years.

We can further evaluate CNC Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years CNC Holdings’s top-line has risen by 12.22% on average, implying that the company is in a high-growth period with expenses racing ahead revenues, leading to annual losses. Viewing growth from a sector-level, the HK construction industry has been enduring some headwinds over the past few years, leading to an average earnings drop of -16.20% in the most recent year. This means whatever near-term the industry is experiencing, it’s hitting CNC Holdings harder than its peers.

What does this mean?

Though CNC Holdings’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most insightful step is to assess company-specific issues CNC Holdings may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research CNC Holdings to get a more holistic view of the stock by looking at:

1. Financial Health: Is 8356’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. Valuation: What is 8356 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 8356 is currently mispriced by the market.

3. 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 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.