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When China Gas Holdings Limited (HKG:384) released its most recent earnings update (30 September 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how China Gas Holdings performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see 384 has performed.
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How Well Did 384 Perform?
384’s trailing twelve-month earnings (from 30 September 2018) of HK$6.9b has jumped 18% 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 384 is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, China Gas Holdings has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.3% exceeds the HK Gas Utilities industry of 4.9%, indicating China Gas Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for China Gas Holdings’s debt level, has increased over the past 3 years from 12% to 13%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 124% to 95% over the past 5 years.
What does this mean?
Though China Gas Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as China Gas Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research China Gas Holdings to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 384’s future growth? Take a look at our free research report of analyst consensus for 384’s outlook.
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Financial Health: Are 384’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.