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On 31 December 2018, Chinasoft International Limited (HKG:354) announced its earnings update. Overall, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 16% next year against the higher past 5-year average growth rate of 31%. With trailing-twelve-month net income at current levels of CN¥716m, we should see this rise to CN¥827m in 2020. Below is a brief commentary around Chinasoft International’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
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Exciting times ahead?
The longer term view from the 10 analysts covering 354 is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, 354’s earnings should reach CN¥1.2b, from current levels of CN¥716m, resulting in an annual growth rate of 17%. This leads to an EPS of CN¥0.43 in the final year of projections relative to the current EPS of CN¥0.30. With a current profit margin of 6.8%, this movement will result in a margin of 7.8% by 2022.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Chinasoft International, I’ve put together three essential aspects you should look at:
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Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
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Valuation: What is Chinasoft International 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 Chinasoft International is currently mispriced by the market.
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Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Chinasoft International? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.