When CircuTech International Holdings Limited (HKG:8051) released its most recent earnings update (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were CircuTech International Holdings's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 8051 actually performed well. Below is a quick commentary on how I see 8051 has performed.

Check out our latest analysis for CircuTech International Holdings

Was 8051's weak performance lately a part of a long-term decline?

8051 is loss-making, with the most recent trailing twelve-month earnings of -HK$14.6m (from 31 December 2018), which compared to last year has become more negative. Furthermore, the company's loss seem to be growing over time, with the five-year earnings average of -HK$8.9m. Each year, for the past five years 8051 has seen an annual increase in operating expense growth, outpacing revenue growth of 55%, on average. This adverse movement is a driver of the company's inability to reach breakeven.

Viewing growth from a sector-level, the HK electronic industry has been relatively flat in terms of earnings growth

Although CircuTech International Holdings is loss-making, its has a good cash runway to meet its upcoming operating expense (should SG&A and one-year R&D remain constant at the current level of HK$29m) over the next year. This is a strong indication of good cash management.

What does this mean?

Though CircuTech International 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 valuable step is to assess company-specific issues CircuTech International Holdings may be facing and whether management guidance has regularly been met in the past. You should continue to research CircuTech International Holdings to get a more holistic view of the stock by looking at:

1. Financial Health: Are 8051’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 8051 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 8051 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.