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The most recent earnings release Zai Lab Limited’s (NASDAQ:ZLAB) announced in December 2018 signalled that losses became smaller relative to the prior year’s level – great news for investors Today I want to provide a brief commentary on how market analysts view Zai Lab’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for the coming year seems relatively muted, with earnings continuing to flop around in the negative territory, arriving at -US$143.7m in 2020. In addition, earnings are expected to fall further in the following year, before bouncing back up again to -US$120.5m in 2022.
While it is helpful to understand the growth rate each year relative to today’s value, it may be more insightful gauging the rate at which the earnings are rising or falling every year, on average. The pro of this technique is that we can get a bigger picture of the direction of Zai Lab’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 42%. This means that, we can expect Zai Lab will grow its earnings by 42% every year for the next few years.
For Zai Lab, I’ve compiled three key 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 ZLAB 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 ZLAB is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ZLAB? 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.