In June 2017, Geely Automobile Holdings Limited (SEHK:175) released its most recent earnings announcement, which signalled that the company gained from a substantial tailwind, more than doubling its earnings from the prior year. Below is my commentary, albeit very simple and high-level, on how market analysts view Geely Automobile Holdings’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 Geely Automobile Holdings
Analysts’ expectations for the upcoming year seems positive, with earnings rising by a robust 47.95%. This growth seems to continue into the following year with rates arriving at double digit 97.29% compared to today’s earnings, and finally hitting CN¥17,538.3M by 2020.
Although it’s helpful to be aware of the growth rate each year relative to today’s value, it may be more valuable analyzing the rate at which the business is rising or falling on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Geely Automobile Holdings’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 27.06%. This means that, we can presume Geely Automobile Holdings will grow its earnings by 27.06% every year for the next few years.
Next Steps:
For Geely Automobile Holdings, I’ve compiled three key factors you should look at:
1. 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.
2. Valuation: What is 175 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 175 is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of 175? 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.