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For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Brilliance China Automotive Holdings Limited’s (HKG:1114) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for Brilliance China Automotive Holdings
Could 1114 beat the long-term trend and outperform its industry?
1114’s trailing twelve-month earnings (from 31 December 2017) of HK$4.38b has jumped 18.85% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 10.92%, indicating the rate at which 1114 is growing has accelerated. What’s the driver of this growth? Let’s see whether it is merely attributable to an industry uplift, or if Brilliance China Automotive Holdings has experienced some company-specific growth.
In the past couple of years, Brilliance China Automotive Holdings grew bottom-line, while its top-line declined, by effectively managing its costs. This brought about to a margin expansion and profitability over time. Inspecting growth from a sector-level, the HK auto industry has been growing, albeit, at a subdued single-digit rate of 3.25% over the past twelve months, and a substantial 10.92% over the past five. This means whatever near-term headwind the industry is experiencing, Brilliance China Automotive Holdings is less exposed compared to its peers.
In terms of returns from investment, Brilliance China Automotive Holdings has not invested its equity funds well, leading to a 14.48% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 11.78% exceeds the HK Auto industry of 4.98%, indicating Brilliance China Automotive Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Brilliance China Automotive Holdings’s debt level, has declined over the past 3 years from 33.15% to 17.14%.
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 Brilliance China Automotive Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Brilliance China Automotive Holdings 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 1114’s future growth? Take a look at our free research report of analyst consensus for 1114’s outlook.
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Financial Health: Is 1114’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.