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In September 2018, Guangshen Railway Company Limited (HKG:525) released its earnings update. Generally, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 23% next year relative to the past 5-year average growth rate of 1.8%. Currently with trailing-twelve-month earnings of CN¥1.0b, we can expect this to reach CN¥1.2b by 2020. Below is a brief commentary around Guangshen Railway's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 10 analysts of 525 is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for 525, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of 6.0% based on the most recent earnings level of CN¥1.0b to the final forecast of CN¥1.1b by 2022. EPS reaches CN¥0.17 in the final year of forecast compared to the current CN¥0.14 EPS today. However, the expansion of the current 5.5% margin is not expected to be sustained, as it begins to contract to 5.4% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Guangshen Railway, I've put together three important 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 Guangshen Railway 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 Guangshen Railway is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Guangshen Railway? 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 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.