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Since Radico Khaitan Limited (NSE:RADICO) released its earnings in March 2018, analyst consensus outlook appear cautiously optimistic, as a 37% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of 7.5%. Currently with trailing-twelve-month earnings of ₹1.2b, we can expect this to reach ₹1.7b by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
See our latest analysis for Radico Khaitan
Can we expect Radico Khaitan to keep growing?
The 3 analysts covering RADICO view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for RADICO, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of ₹1.2b and the final forecast of ₹2.5b by 2021, the annual rate of growth for RADICO’s earnings is 22%. This leads to an EPS of ₹18.54 in the final year of projections relative to the current EPS of ₹9.3. Earnings growth appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 6.8%, this movement will result in a margin of 10% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Radico Khaitan, there are three fundamental aspects you should look at:
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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 Radico Khaitan 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 Radico Khaitan 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 Radico Khaitan? 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.