The most recent earnings update Idea Cellular Limited’s (NSEI:IDEA) released in September 2017 revealed that the company entered the red zone with earnings dropping into the negative territory due to recent headwinds. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Idea Cellular’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. View our latest analysis for Idea Cellular
Analysts’ expectations for the coming year seems pessimistic, with earnings becoming even more negative, arriving at ₹-40,379.3M in 2018. In the following year, earnings are expected to stay relatively flat before increasing to ₹-28,380.7M in 2020.
Even though it’s useful to be aware of the rate of growth each year relative to today’s figure, it may be more valuable analyzing the rate at which the business is rising or falling on average every year. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Idea Cellular’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 14.05%. This means, we can presume Idea Cellular will grow its earnings by 14.05% every year for the next few years.
Next Steps:
For Idea Cellular, I’ve put together three relevant 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 IDEA 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 IDEA is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of IDEA? 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.