China Water Affairs Group Limited's (HKG:855) latest earnings update in July 2019 showed that the business benefited from a robust tailwind, leading to a double-digit earnings growth of 20%. Below, I've laid out key numbers on how market analysts perceive China Water Affairs Group's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts' prospects for next year seems buoyant, with earnings increasing by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 34% compared to today’s earnings, and finally hitting HK$2.2b by 2022.
Even though it is useful to be aware of the rate of growth year by year relative to today’s figure, it may be more insightful evaluating the rate at which the earnings are moving every year, on average. The advantage of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of China Water Affairs Group'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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 15%. This means that, we can expect China Water Affairs Group will grow its earnings by 15% every year for the next couple of years.
For China Water Affairs Group, I've compiled 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 855 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 855 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 855? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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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.