In this article, I will take a look at Capital Finance Holdings Limited’s (SEHK:8239) most recent earnings update (31 December 2017) and compare these latest figures against its performance over the past few years, along with how the rest of 8239’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. See our latest analysis for Capital Finance Holdings

Commentary On 8239’s Past Performance

For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to analyze various companies on a similar basis, using the most relevant data points. For Capital Finance Holdings, its most recent earnings (trailing twelve month) is -HK$14.73M, which, relative to last year’s figure, has become less negative. Given that these values may be fairly short-term, I have calculated an annualized five-year value for 8239’s net income, which stands at -HK$190.59M. This means that, although net income is negative, it has become less negative over the years.

We can further evaluate Capital Finance Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Capital Finance Holdings’s top-line has increased by a mere 5.08%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Looking at growth from a sector-level, the HK consumer finance industry has been growing its average earnings by double-digit 16.40% in the prior year, and 11.99% over the previous five years. This means even though Capital Finance Holdings is currently running a loss, it may have benefited from industry tailwinds, moving earnings into a more favorable position.

What does this mean?

Capital Finance Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to envisage what will occur going forward, and when. The most insightful step is to examine company-specific issues Capital Finance Holdings may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Capital Finance Holdings to get a better picture of the stock by looking at: