The most recent earnings release China Traditional Chinese Medicine Holdings Co. Limited’s (HKG:570) announced in April 2019 confirmed that the company benefited from a strong tailwind, eventuating to a double-digit earnings growth of 23%. Investors may find it useful to understand how market analysts view China Traditional Chinese Medicine Holdings’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for the coming year seems positive, with earnings climbing by a robust 19%. This growth seems to continue into the following year with rates reaching double digit 44% compared to today’s earnings, and finally hitting CN¥2.5b by 2022.
While it’s informative knowing the rate of growth year by year relative to today’s level, it may be more valuable to estimate the rate at which the company is growing on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of China Traditional Chinese Medicine 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 16%. This means, we can expect China Traditional Chinese Medicine Holdings will grow its earnings by 16% every year for the next couple of years.
For China Traditional Chinese Medicine Holdings, I’ve put together three relevant 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 570 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 570 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 570? 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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