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In December 2017, Weichai Power Co Ltd. (SEHK:2338) announced its latest earnings update, which revealed that the company benefited from a significant tailwind, more than doubling its earnings from the prior year. Below, I’ve laid out key numbers on how market analysts perceive Weichai Power’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. See our latest analysis for Weichai Power
Market analysts’ consensus outlook for next year seems rather subdued, with earnings expanding by a single digit 6.30%. However, the following year seems to show a contrast, with earnings declining by -0.045%. This volatility continues into the final year of forecast, with earnings generating CN¥8.04B.
While it is helpful to be aware of the growth each year relative to today’s level, it may be more valuable to analyze the rate at which the business is rising or falling every year, on average. The pro of this approach is that we can get a better picture of the direction of Weichai Power’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate 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 3.56%. This means that, we can expect Weichai Power will grow its earnings by 3.56% every year for the next couple of years.
Next Steps:
For Weichai Power, I’ve compiled three essential 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 2338 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 2338 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 2338? 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.