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On 31 March 2019, Mahanagar Gas Limited (NSE:MGL) released its earnings update. Generally, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 9.1% in the upcoming year compared with the higher past 5-year average growth rate of 14%. Currently with trailing-twelve-month earnings of ₹5.5b, we can expect this to reach ₹6.0b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How is Mahanagar Gas going to perform in the near future?
Longer term expectations from the 20 analysts covering MGL’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for MGL, 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.
From the current net income level of ₹5.5b and the final forecast of ₹6.8b by 2022, the annual rate of growth for MGL’s earnings is 6.0%. EPS reaches ₹69.78 in the final year of forecast compared to the current ₹55.31 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 20% to 19% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Mahanagar Gas, there are three relevant aspects 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 Mahanagar Gas 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 Mahanagar Gas is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Mahanagar Gas? 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 firstname.lastname@example.org. 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.