Huami Corporation’s (NYSE:HMI) most recent earnings announcement in December 2018 suggested that the business gained from a substantial tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts perceive Huami’s earnings growth outlook over the next couple of 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 next year seems positive, with earnings climbing by a robust 37%. This growth seems to continue into the following year with rates reaching double digit 79% compared to today’s earnings, and finally hitting CN¥707m by 2022.
Although it’s informative knowing the growth each year relative to today’s level, it may be more valuable to gauge the rate at which the earnings are rising or falling on average every year. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Huami’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 26%. This means that, we can anticipate Huami will grow its earnings by 26% every year for the next few years.
For Huami, I’ve put together three important factors 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 HMI 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 HMI is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HMI? 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.