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Looking at CLP Holdings Limited’s (HKG:2) earnings update in December 2018, it seems that analyst forecasts are fairly pessimistic, with earnings expected to decline by 12% in the upcoming year relative to the past 5-year average growth rate of 11%. Presently, with latest-twelve-month earnings at HK$14b, we should see this fall to HK$12b by 2020. Below is a brief commentary on the longer term outlook the market has for CLP Holdings. For those interested in more of an analysis of the company, you can research its fundamentals here.
Can we expect CLP Holdings to keep growing?
Longer term expectations from the 13 analysts covering 2’s stock is one of negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. 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 2’s earnings growth over these next few years.
This results in an annual growth rate of -1.5% based on the most recent earnings level of HK$14b to the final forecast of HK$13b by 2022. This leads to an EPS of HK$5.1 in the final year of projections relative to the current EPS of HK$5.36. Earnings decline appears to be a result of top-line expansion of 1.2%, which is predicted to lag cost growth leading up to 2022. Furthermore, the current 15% margin is expected to contract to 14% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For CLP Holdings, there are 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 CLP Holdings 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 CLP Holdings is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CLP Holdings? 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 email@example.com. 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.