The most recent earnings announcement Yancoal Australia Ltd’s (ASX:YAL) released in February 2019 confirmed that the company experienced a substantial tailwind, more than doubling its earnings from the prior year. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Yancoal Australia’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.
Market analysts’ consensus outlook for the upcoming year seems pessimistic, with earnings decreasing by a double-digit -14%. In the next couple of years, earnings should continue to be below today’s level, with a decline of -23% in 2021, eventually reaching AU$658m in 2022.
Although it is helpful to understand the growth each year relative to today’s value, it may be more insightful analyzing the rate at which the company is moving every year, on average. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Yancoal Australia’s earnings trajectory over time, fluctuate up and down. To calculate this rate, I’ve inserted 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 -14%. This means that, we can assume Yancoal Australia will chip away at a rate of -14% every year for the next couple of years.
For Yancoal Australia, I’ve put together three important aspects you should further research:
- 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.
- Valuation: What is YAL 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 YAL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of YAL? 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 email@example.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.