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In March 2019, HDFC Bank Limited (NSE:HDFCBANK) announced its most recent earnings update, which confirmed that the company experienced a strong tailwind, leading to a double-digit earnings growth of 21%. Below is a brief commentary on my key takeaways on how market analysts view HDFC Bank's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Check out our latest analysis for HDFC Bank
Market analysts' consensus outlook for this coming year seems optimistic, with earnings increasing by a robust 16%. This growth seems to continue into the following year with rates arriving at double digit 40% compared to today’s earnings, and finally hitting ₹375b by 2022.
Even though it is useful to be aware of the growth year by year relative to today’s value, it may be more insightful to analyze the rate at which the company is growing every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of HDFC Bank's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 15%. This means, we can presume HDFC Bank will grow its earnings by 15% every year for the next few years.
Next Steps:
For HDFC Bank, there are three relevant factors you should further research:
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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 HDFCBANK 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 HDFCBANK 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 HDFCBANK? 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.