On 31 December 2018, China Telecom Corporation Limited (HKG:728) announced its earnings update. Overall, analyst consensus outlook appear cautiously optimistic, as a 6.9% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of 1.9%. Currently with trailing-twelve-month earnings of CN¥21b, we can expect this to reach CN¥23b by 2020. Below is a brief commentary around China Telecom’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How will China Telecom perform in the near future?
The longer term view from the 24 analysts covering 728 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 understand the overall trajectory of 728’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 7.1% based on the most recent earnings level of CN¥21b to the final forecast of CN¥28b by 2022. EPS reaches CN¥0.34 in the final year of forecast compared to the current CN¥0.26 EPS today. With a current profit margin of 5.6%, this movement will result in a margin of 6.5% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For China Telecom, I’ve compiled three important aspects 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 China Telecom 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 China Telecom is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of China Telecom? 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 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.