In December 2018, CEI Limited (SGX:AVV) announced its latest earnings update, which indicated that the company experienced a robust tailwind, leading to a double-digit earnings growth of 14%. Below is my commentary, albeit very simple and high-level, on how market analysts view CEI’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for the coming year seems rather muted, with earnings expanding by a single digit 7.5%. The growth outlook in the following year seems much more positive with rates generating double digit 13% compared to today’s earnings, and finally hitting S$8.9m by 2022.
Although it is informative knowing the growth each year relative to today’s figure, it may be more valuable to estimate the rate at which the company is growing on average every year. The benefit of this method is that it ignores near term flucuations and accounts for the overarching direction of CEI’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 5.8%. This means that, we can assume CEI will grow its earnings by 5.8% every year for the next few years.
For CEI, there are three pertinent factors you should further research:
- 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 AVV 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 AVV is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AVV? 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 email@example.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.