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In March 2018, Oil India Limited (NSE:OIL) released its earnings update. Generally, analysts seem fairly confident, with profits predicted to increase by 34% next year relative to the past 5-year average growth rate of -9.9%. Presently, with latest-twelve-month earnings at ₹27.3b, we should see this growing to ₹36.7b by 2019. Below is a brief commentary around Oil India’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
See our latest analysis for Oil India
What can we expect from Oil India in the longer term?
The 8 analysts covering OIL view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly 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.
This results in an annual growth rate of 7.5% based on the most recent earnings level of ₹27.3b to the final forecast of ₹31.5b by 2021. EPS reaches ₹29.47 in the final year of forecast compared to the current ₹23.9 EPS today. Earnings growth appears to be a result of a higher revenue growth of 7.8% outpacing cost increases. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 26% to 23% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Oil India, 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 Oil India 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 Oil India 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 Oil India? 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 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.