Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess China Oil And Gas Group Limited’s (HKG:603) 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.
Did 603’s recent earnings growth beat the long-term trend and the industry?
603’s trailing twelve-month earnings (from 30 June 2018) of HK$296.4m has increased by 5.1% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -7.2%, indicating the rate at which 603 is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is merely due to an industry uplift, or if China Oil And Gas Group has seen some company-specific growth.
Over the past few years, China Oil And Gas Group top-line expansion has overtaken earnings and the growth rate of expenses. Though this has caused a margin contraction, it has softened China Oil And Gas Group’s earnings contraction.
Scanning growth from a sector-level, the HK gas utilities industry has been growing its average earnings by double-digit 14.2% in the past year, and 12.0% over the past five. This growth is a median of profitable companies of 12 Gas Utilities companies in HK including Binhai Investment, Beijing Gas Blue Sky Holdings and Suchuang Gas. This means that any uplift the industry is deriving benefit from, China Oil And Gas Group has not been able to reap as much as its industry peers.
In terms of returns from investment, China Oil And Gas Group has fallen short of achieving a 20% return on equity (ROE), recording 12.0% instead. Furthermore, its return on assets (ROA) of 2.4% is below the HK Gas Utilities industry of 5.0%, indicating China Oil And Gas Group’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for China Oil And Gas Group’s debt level, has increased over the past 3 years from 5.1% to 8.1%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While China Oil And Gas Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research China Oil And Gas Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 603’s future growth? Take a look at our free research report of analyst consensus for 603’s outlook.
- Financial Health: Are 603’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 firstname.lastname@example.org.