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Nexteer Automotive Group Limited’s (SEHK:1316) most recent earnings announcement in December 2017 suggested that the company benefited from a robust tailwind, eventuating to a double-digit earnings growth of 19.36%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Nexteer Automotive Group’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. View our latest analysis for Nexteer Automotive Group
Analysts’ outlook for the upcoming year seems rather subdued, with earnings rising by a single digit 3.33%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 15.05% compared to today’s earnings, and finally hitting US$437.81M by 2021.
Even though it’s helpful to understand the rate of growth year by year relative to today’s level, it may be more beneficial estimating the rate at which the business is moving on average every year. The benefit of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Nexteer Automotive Group’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 7.64%. This means, we can presume Nexteer Automotive Group will grow its earnings by 7.64% every year for the next couple of years.
Next Steps:
For Nexteer Automotive Group, I’ve compiled three key aspects you should further examine:
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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 1316 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 1316 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 1316? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass 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.