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When Beijing Enterprises Water Group Limited (SEHK:371) announced its most recent earnings (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Beijing Enterprises Water Group has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see 371 has performed.
See our latest analysis for Beijing Enterprises Water Group
Were 371's earnings stronger than its past performances and the industry?
371's trailing twelve-month earnings (from 30 June 2019) of HK$4.9b has jumped 17% 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 22%, indicating the rate at which 371 is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Beijing Enterprises Water Group has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 4.9% exceeds the HK Water Utilities industry of 4.7%, indicating Beijing Enterprises Water Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Beijing Enterprises Water Group’s debt level, has declined over the past 3 years from 8.2% to 7.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 121% to 132% over the past 5 years.
What does this mean?
Beijing Enterprises Water Group'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? You should continue to research Beijing Enterprises Water Group to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 371’s future growth? Take a look at our free research report of analyst consensus for 371’s outlook.
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Financial Health: Are 371’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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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.