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In December 2018, BOC Hong Kong (Holdings) Limited (HKG:2388) announced its latest earnings update, which revealed that the company gained from a strong tailwind, eventuating to a double-digit earnings growth of 12%. Investors may find it useful to understand how market analysts perceive BOC Hong Kong (Holdings)’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for this coming year seems rather subdued, with earnings rising by a single digit 5.5%. The growth outlook in the following year seems much more positive with rates reaching double digit 16% compared to today’s earnings, and finally hitting HK$39b by 2022.
Although it’s informative understanding the growth each year relative to today’s value, it may be more beneficial to estimate the rate at which the business is rising or falling on average every year. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of BOC Hong Kong (Holdings)’s earnings trajectory over time, which may be more relevant for long term investors. 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 6.7%. This means that, we can expect BOC Hong Kong (Holdings) will grow its earnings by 6.7% every year for the next few years.
For BOC Hong Kong (Holdings), there are three relevant factors 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 2388 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 2388 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 2388? 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.