Looking at ABB India Limited’s (NSEI:ABB) earnings update in December 2017, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 44.31% next year against the past 5-year average growth rate of 17.74%. Currently with earnings of ₹4,199.5M, we can expect this to reach ₹6,060.2M by 2019. Below is a brief commentary on the longer term outlook the market has for ABB India. Readers that are interested in understanding the company beyond these figures should research its fundamentals here. Check out our latest analysis for ABB India
How will ABB India perform in the near future?
The view from 22 analysts over the next three years 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.
From the current net income level of ₹4,199.5M and the final forecast of ₹7,729.7M by 2021, the annual rate of growth for ABB’s earnings is 24.04%. This leads to an EPS of ₹38.42 in the final year of projections relative to the current EPS of ₹19.82. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 4.42%, this movement will result in a margin of 5.96% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For ABB India, there are three pertinent factors you should look at:
- 1. 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.
- 2. Valuation: What is ABB India 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 ABB India is currently mispriced by the market.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ABB India? 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 pass 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.