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The latest earnings announcement CapitaLand Retail China Trust (SGX:AU8U) released in December 2018 confirmed that the company experienced a immense headwind with earnings deteriorating by -11%. Today I want to provide a brief commentary on how market analysts perceive CapitaLand Retail China Trust’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for this coming year seems pessimistic, with earnings decreasing by a double-digit -28%. In the next couple of years, earnings are predicted to continue to be below today’s level, with a decline of -16% in 2021, eventually reaching S$108m in 2022.
While it is useful to understand the rate of growth year by year relative to today’s value, it may be more valuable estimating the rate at which the earnings are growing on average every year. The advantage of this approach is that it ignores near term flucuations and accounts for the overarching direction of CapitaLand Retail China Trust’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -1.6%. This means, we can presume CapitaLand Retail China Trust will chip away at a rate of -1.6% every year for the next few years.
For CapitaLand Retail China Trust, there are three relevant factors you should look at:
- 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 AU8U 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 AU8U is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AU8U? 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.