In This Article:
For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Xinchen China Power Holdings Limited’s (HKG:1148) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Check out our latest analysis for Xinchen China Power Holdings
Despite a decline, did 1148 underperform the long-term trend and the industry?
1148’s trailing twelve-month earnings (from 30 June 2018) of CN¥115m has declined by -11% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -18%, indicating the rate at which 1148 is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Xinchen China Power Holdings has fallen short of achieving a 20% return on equity (ROE), recording 3.8% instead. Furthermore, its return on assets (ROA) of 2.6% is below the HK Auto Components industry of 7.7%, indicating Xinchen China Power Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Xinchen China Power Holdings’s debt level, has declined over the past 3 years from 8.5% to 3.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 11% to 62% over the past 5 years.
What does this mean?
Though Xinchen China Power Holdings’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. You should continue to research Xinchen China Power Holdings to get a more holistic view of the stock by looking at:
-
Future Outlook: What are well-informed industry analysts predicting for 1148’s future growth? Take a look at our free research report of analyst consensus for 1148’s outlook.
-
Financial Health: Are 1148’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.
-
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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.