As Hong Kong Exchanges and Clearing Limited (HKG:388) released its earnings announcement on 31 December 2018, the consensus outlook from analysts appear fairly confident, with earnings expected to grow by 14% in the upcoming year relative to the past 5-year average growth rate of 12%. Currently with trailing-twelve-month earnings of HK$9.3b, we can expect this to reach HK$11b by 2020. Below is a brief commentary on the longer term outlook the market has for Hong Kong Exchanges and Clearing. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Hong Kong Exchanges and Clearing in the longer term?
The view from 14 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of HK$9.3b and the final forecast of HK$14b by 2022, the annual rate of growth for 388’s earnings is 13%. This leads to an EPS of HK$10.55 in the final year of projections relative to the current EPS of HK$7.5. Margins are currently sitting at 59%, which is expected to expand to 65% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Hong Kong Exchanges and Clearing, there are three key 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 Hong Kong Exchanges and Clearing 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 Hong Kong Exchanges and Clearing is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Hong Kong Exchanges and Clearing? 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.