Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

When Nanfang Communication Holdings Limited (HKG:1617) released its most recent earnings update (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Nanfang Communication 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 1617 has performed.

View our latest analysis for Nanfang Communication Holdings

Were 1617's earnings stronger than its past performances and the industry?

1617's trailing twelve-month earnings (from 31 December 2018) of CN¥141m has increased by 8.5% 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 28%, indicating the rate at which 1617 is growing has slowed down. To understand what's happening, let’s take a look at what’s transpiring with margins and if the rest of the industry is feeling the heat.

In terms of returns from investment, Nanfang Communication Holdings has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 9.5% exceeds the HK Communications industry of 8.4%, indicating Nanfang Communication Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Nanfang Communication Holdings’s debt level, has declined over the past 3 years from 23% to 14%.

What does this mean?

While past data is useful, it 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? I suggest you continue to research Nanfang Communication Holdings to get a better picture of the stock by looking at:

1. Financial Health: Are 1617’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.

2. Valuation: What is 1617 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 1617 is currently mispriced by the market.

3. 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.