In this commentary, I will examine Haitong International Securities Group Limited’s (SEHK:665) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the capital markets industry performed. As an investor, I find it beneficial to assess 665’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Haitong International Securities Group

Were 665’s earnings stronger than its past performances and the industry?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, 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 method allows me to assess various companies on a more comparable basis, using the most relevant data points. For Haitong International Securities Group, its most recent trailing-twelve-month earnings is HK$1.91B, which, against the previous year’s level, has jumped by a non-trivial 59.68%. Given that these values are somewhat nearsighted, I have determined an annualized five-year value for Haitong International Securities Group’s net income, which stands at HK$1.04B This shows that, on average, Haitong International Securities Group has been able to steadily grow its bottom line over the past few years as well.

What’s the driver of this growth? Let’s see whether it is only owing to industry tailwinds, or if Haitong International Securities Group has seen some company-specific growth. In the past couple of years, Haitong International Securities Group increased its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the HK capital markets industry has been growing its average earnings by double-digit 11.06% over the past twelve months, and 14.15% over the past half a decade. This means any tailwind the industry is enjoying, Haitong International Securities Group is capable of leveraging this to its advantage.

What does this mean?

Haitong International Securities Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Haitong International Securities Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Haitong International Securities Group to get a better picture of the stock by looking at: