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Based on Yirendai Ltd.’s (NYSE:YRD) recently announced earnings update on 31 December 2018, analyst forecasts appear to be bearish, with profits predicted to drop by 2.3% next year against the past 5-year average growth rate of 45%. Presently, with latest-twelve-month earnings at CN¥967m, we should see this fall to CN¥944m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Yirendai in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How will Yirendai perform in the near future?
Longer term expectations from the 9 analysts covering YRD’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 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 9.6% based on the most recent earnings level of CN¥967m to the final forecast of CN¥1.2b by 2022. EPS reaches CN¥18.89 in the final year of forecast compared to the current CN¥15.81 EPS today. With a current profit margin of 17%, this movement will result in a margin of 20% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Yirendai, there are three key 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 Yirendai 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 Yirendai is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Yirendai? 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.