Beijing Tong Ren Tang Chinese Medicine Company Limited’s (HKG:3613) most recent earnings announcement in April 2019 confirmed that the company experienced a strong tailwind, leading to a double-digit earnings growth of 19%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Beijing Tong Ren Tang Chinese Medicine’s earnings growth outlook over the next few 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.
Analysts’ outlook for next year seems positive, with earnings growing by a robust 15%. This growth seems to continue into the following year with rates reaching double digit 33% compared to today’s earnings, and finally hitting HK$879m by 2022.
While it’s helpful to be aware of the rate of growth year by year relative to today’s figure, it may be more insightful to evaluate the rate at which the business is rising or falling on average every year. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of Beijing Tong Ren Tang Chinese Medicine’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve appended 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 14%. This means that, we can assume Beijing Tong Ren Tang Chinese Medicine will grow its earnings by 14% every year for the next few years.
For Beijing Tong Ren Tang Chinese Medicine, I’ve put together three pertinent factors you should further examine:
- 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 3613 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 3613 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 3613? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.