What Should Investors Know About China Resources Gas Group Limited’s (HKG:1193) Growth?

After China Resources Gas Group Limited’s (HKG:1193) earnings announcement in June 2018, analysts seem fairly confident, with earnings expected to grow by 15% in the upcoming year against the past 5-year average growth rate of 14%. With trailing-twelve-month net income at current levels of HK$3.7b, we should see this rise to HK$4.2b in 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for China Resources Gas Group in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for China Resources Gas Group

Exciting times ahead?

Over the next three years, it seems the consensus view of the 23 analysts covering 1193 is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for 1193, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

SEHK:1193 Future Profit December 20th 18
SEHK:1193 Future Profit December 20th 18

This results in an annual growth rate of 12% based on the most recent earnings level of HK$3.7b to the final forecast of HK$4.9b by 2021. This leads to an EPS of HK$2.55 in the final year of projections relative to the current EPS of HK$1.68. This initial high-growth revenue squeezes 1193’s margins. However, analysts are expecting earnings growth to catch up, and current margins of 9.2% to expand to 9.2% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For China Resources Gas Group, I’ve compiled three relevant factors you should further examine:

  1. 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.
  2. Valuation: What is China Resources Gas Group 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 Resources Gas Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of China Resources Gas Group? 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 editorial-team@simplywallst.com.