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Measuring China Environmental Technology and Bioenergy Holdings Limited’s (HKG:1237) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 1237’s recent performance announced on 30 June 2018 and compare these figures to its historical trend and industry movements.
Check out our latest analysis for China Environmental Technology and Bioenergy Holdings
Did 1237 perform worse than its track record and industry?
1237 is loss-making, with the most recent trailing twelve-month earnings of -CN¥26.2m (from 30 June 2018), which compared to last year has become more negative. Over the past five years, its average earnings level was positive at CN¥48.4m, which meant its expenses has only exceeded revenues recently, pulling 1237 into the loss-making zone.
Each year, for the past five years 1237 has seen an annual increase in operating expense growth, outpacing revenue growth of 4.1%, on average. This adverse movement is a driver of the company’s inability to reach breakeven.
Inspecting growth from a sector-level, the HK leisure industry has been relatively flat in terms of earnings growth in the previous twelve months, levelling off from a robust 17.6% over the past five. This growth is a median of profitable companies of 11 Leisure companies in HK including Alpha Era International Holdings, Goodbaby International Holdings and Honma Golf. This means whatever near-term headwind the industry is enduring, it’s hitting China Environmental Technology and Bioenergy Holdings harder than its peers.
Given that China Environmental Technology and Bioenergy Holdings is not profitable, even if operating expenses (SG&A and one-year R&D) continues to fall at previous year’s rate of -0.4%, the company’s current cash level (CN¥48.1m) will still be insufficient to cover its expenses in the upcoming year. This is not a great sign in terms of operations and cash management. Even though this is analysis is fairly basic, and China Environmental Technology and Bioenergy Holdings still can cut its overhead further, or open a new line of credit instead of issuing new equity shares, the outcome of this analysis still gives us an idea of the company’s timeline and when things will have to start changing, since its current operation is unsustainable.
What does this mean?
Though China Environmental Technology and Bioenergy Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to predict what will occur going forward, and when. The most insightful step is to assess company-specific issues China Environmental Technology and Bioenergy Holdings may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research China Environmental Technology and Bioenergy Holdings to get a better picture of the stock by looking at: