In This Article:
In this article, I will take a look at Beijing Digital Telecom Co., Ltd.'s (SEHK:6188) most recent earnings update (31 December 2019) and compare these latest figures against its performance over the past few years, along with how the rest of 6188's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
See our latest analysis for Beijing Digital Telecom
How Did 6188's Recent Performance Stack Up Against Its Past?
6188's trailing twelve-month earnings (from 31 December 2019) of CN¥259m has declined by -17% 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 -3.5%, indicating the rate at which 6188 is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Beijing Digital Telecom has fallen short of achieving a 20% return on equity (ROE), recording 6.3% instead. Furthermore, its return on assets (ROA) of 4.4% is below the HK Specialty Retail industry of 5.4%, indicating Beijing Digital Telecom's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Beijing Digital Telecom’s debt level, has declined over the past 3 years from 15% to 12%. 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?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face a prolonged period of decline in earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes Beijing Digital Telecom and its peers a higher risk investment. You should continue to research Beijing Digital Telecom to get a more holistic view of the stock by looking at:
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Financial Health: Are 6188’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.
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Valuation: What is 6188 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 6188 is currently mispriced by the market.
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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.