L&T Technology Services Limited (NSE:LTTS): Will The Growth Last?

After L&T Technology Services Limited’s (NSE:LTTS) earnings announcement on 31 March 2019, the consensus outlook from analysts appear somewhat bearish, as a 7.2% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 31%. Presently, with latest-twelve-month earnings at ₹7.7b, we should see this growing to ₹8.2b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

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View our latest analysis for L&T Technology Services

Exciting times ahead?

The longer term view from the 14 analysts covering LTTS is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. 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 LTTS’s earnings growth over these next few years.

NSEI:LTTS Past and Future Earnings, May 21st 2019
NSEI:LTTS Past and Future Earnings, May 21st 2019

From the current net income level of ₹7.7b and the final forecast of ₹10b by 2022, the annual rate of growth for LTTS’s earnings is 10%. This leads to an EPS of ₹98.61 in the final year of projections relative to the current EPS of ₹74.06. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 15% to 13% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For L&T Technology Services, I’ve compiled three key aspects you should further research:

  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 L&T Technology Services 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 L&T Technology Services is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of L&T Technology Services? 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 editorial-team@simplywallst.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.