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After reading China New Town Development Company Limited's (SEHK:1278) most recent earnings announcement (30 June 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether China New Town Development's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Check out our latest analysis for China New Town Development
Did 1278 beat its long-term earnings growth trend and its industry?
1278's trailing twelve-month earnings (from 30 June 2019) of CN¥207m has jumped 12% 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 26%, indicating the rate at which 1278 is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, China New Town Development has fallen short of achieving a 20% return on equity (ROE), recording 5.1% instead. However, its return on assets (ROA) of 3.8% exceeds the HK Real Estate industry of 2.9%, indicating China New Town Development has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for China New Town Development’s debt level, has declined over the past 3 years from 1.4% to 0.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 23% to 61% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as China New Town Development gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research China New Town Development 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 1278’s future growth? Take a look at our free research report of analyst consensus for 1278’s outlook.
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Financial Health: Are 1278’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.