Since Lee and Man Paper Manufacturing Limited (HKG:2314) released its earnings in June 2018, it seems that analyst forecasts are fairly bearish, with earnings expected to decline by -11% in the upcoming year against the past 5-year average growth rate of 28%. Presently, with latest-twelve-month earnings at HK$5.0b, we should see this fall to HK$4.5b by 2019. Below is a brief commentary on the longer term outlook the market has for Lee and Man Paper Manufacturing. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How will Lee and Man Paper Manufacturing perform in the near future?
Over the next three years, it seems the consensus view of the 18 analysts covering 2314 is skewed towards the negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of 2314’s earnings growth over these next few years.
By 2021, 2314’s earnings should reach HK$4.9b, from current levels of HK$5.0b, resulting in an annual growth rate of -4.3%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of HK$1.24 in the final year of forecast compared to the current HK$1.11 EPS today. The primary reason for earnings contraction is due to cost growth exceeding top-line growth of 4.9% in the next three years. Furthermore, the current 20% margin is expected to contract to 16% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Lee and Man Paper Manufacturing, I’ve put together three key factors you should look at:
- 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 Lee and Man Paper Manufacturing 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 Lee and Man Paper Manufacturing is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lee and Man Paper Manufacturing? 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 past 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. For errors that warrant correction please contact the editor at email@example.com.