On 31 December 2018, Sheng Siong Group Ltd (SGX:OV8) released its earnings update. Generally, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 9.5% in the upcoming year against the higher past 5-year average growth rate of 12%. With trailing-twelve-month net income at current levels of S$71m, we should see this rise to S$77m in 2020. Below is a brief commentary around Sheng Siong Group’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is Sheng Siong Group going to perform in the near future?
The 8 analysts covering OV8 view its longer term outlook with a 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.
This results in an annual growth rate of 6.9% based on the most recent earnings level of S$71m to the final forecast of S$86m by 2022. EPS reaches SGD0.057 in the final year of forecast compared to the current SGD0.047 EPS today. Margins are currently sitting at 7.9%, which is expected to expand to 8.1% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Sheng Siong Group, I’ve put together three important 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 Sheng Siong Group 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 Sheng Siong Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sheng Siong Group? 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.