What Do Analysts Think About HCL Technologies Limited's (NSE:HCLTECH) Future?

In March 2018, HCL Technologies Limited (NSE:HCLTECH) released its earnings update. Generally, analysts seem cautiously bearish, with profits predicted to rise by 2.38% next year against the higher past 5-year average growth rate of 16.29%. Presently, with latest-twelve-month earnings at US$1.36b, we should see this growing to US$1.39b by 2019. Below is a brief commentary around HCL Technologies'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.

See our latest analysis for HCL Technologies

How is HCL Technologies going to perform in the near future?

The longer term expectations from the 34 analysts of HCLTECH is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

By 2021, HCLTECH's earnings should reach US$1.67b, from current levels of US$1.36b, resulting in an annual growth rate of 6.68%. This leads to an EPS of $1.19 in the final year of projections relative to the current EPS of $0.97. The bottom-line growth seems to be caused by a high top-line growth of 8.42% falling down into the bottom line. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 17.35% to 16.54% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For HCL Technologies, there are three essential factors 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 HCL Technologies 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 HCL Technologies is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of HCL Technologies? 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 pass 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.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.