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The latest earnings release TVS Motor Company Limited’s (NSE:TVSMOTOR) announced in March 2018 signalled that the company benefited from a robust tailwind, eventuating to a double-digit earnings growth of 28%. Below is a brief commentary on my key takeaways on how market analysts predict TVS Motor’s earnings growth outlook over the next couple of 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.
Market analysts’ prospects for this coming year seems positive, with earnings expanding by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 49% compared to today’s earnings, and finally hitting ₹11b by 2022.
Although it’s helpful to understand the growth year by year relative to today’s level, it may be more insightful evaluating the rate at which the business is rising or falling on average every year. The pro of this method is that we can get a better picture of the direction of TVS Motor’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended 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 19%. This means that, we can presume TVS Motor will grow its earnings by 19% every year for the next couple of years.
For TVS Motor, there are three essential 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 TVSMOTOR 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 TVSMOTOR is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TVSMOTOR? 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 email@example.com.