Tata Elxsi Limited (NSE:TATAELXSI): Is It A Smart Long Term Opportunity?

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On 31 March 2019, Tata Elxsi Limited (NSE:TATAELXSI) released its earnings update. Generally, analyst forecasts seem fairly subdued, with profits predicted to rise by 8.3% next year relative to the higher past 5-year average growth rate of 26%. With trailing-twelve-month net income at current levels of ₹2.9b, we should see this rise to ₹3.1b in 2020. Below is a brief commentary on the longer term outlook the market has for Tata Elxsi. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for Tata Elxsi

How will Tata Elxsi perform in the near future?

The longer term view from the 4 analysts covering TATAELXSI is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of TATAELXSI's earnings growth over these next few years.

NSEI:TATAELXSI Past and Future Earnings, July 1st 2019
NSEI:TATAELXSI Past and Future Earnings, July 1st 2019

By 2022, TATAELXSI's earnings should reach ₹3.7b, from current levels of ₹2.9b, resulting in an annual growth rate of 9.5%. This leads to an EPS of ₹59 in the final year of projections relative to the current EPS of ₹46.56. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 18% to 17% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Tata Elxsi, I've compiled three important aspects 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 Tata Elxsi 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 Tata Elxsi is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Tata Elxsi? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.

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