In March 2018, Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) released its latest earnings announcement, which revealed that the business benefited from a strong tailwind, leading to a double-digit earnings growth of 35.6%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Cholamandalam Investment and Finance’s earnings growth trajectory over the next couple of 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.
Analysts’ outlook for the upcoming year seems positive, with earnings increasing by a robust 28.3%. This growth seems to continue into the following year with rates arriving at double digit 59.5% compared to today’s earnings, and finally hitting ₹18.21b by 2021.
Even though it’s useful to be aware of the growth rate each year relative to today’s figure, it may be more valuable to estimate the rate at which the earnings are moving on average every year. The advantage of this method is that we can get a bigger picture of the direction of Cholamandalam Investment and Finance’s earnings trajectory over the long run, irrespective of near term fluctuations, 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 18.0%. This means that, we can anticipate Cholamandalam Investment and Finance will grow its earnings by 18.0% every year for the next couple of years.
For Cholamandalam Investment and Finance, I’ve put together three fundamental aspects 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 CHOLAFIN 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 CHOLAFIN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CHOLAFIN? 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.