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Vtech Holdings Limited's (HKG:303) most recent earnings update in June 2019 indicated that the business experienced a major headwind with earnings falling by -17%. Below is a brief commentary on my key takeaways on how market analysts predict Vtech Holdings's earnings growth trajectory over the next couple of 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.
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Analysts' expectations for the coming year seems rather subdued, with earnings increasing by a single digit 5.6%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 20% compared to today’s earnings and falls to US$198m by 2022.
Even though it is helpful to be aware of the growth each year relative to today’s level, it may be more beneficial to estimate the rate at which the company is growing every year, on average. The benefit of this method is that we can get a better picture of the direction of Vtech Holdings's earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. 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 6.4%. This means that, we can expect Vtech Holdings will grow its earnings by 6.4% every year for the next few years.
Next Steps:
For Vtech Holdings, I've compiled three important factors you should further research:
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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 303 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 303 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 303? 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.