In September 2018, YY Inc. (NASDAQ:YY) released its earnings update. Generally, analysts seem extremely confident, with profits predicted to ramp up by an impressive 59% next year, relative to the historical 5-year average growth rate of 23%. Currently with trailing-twelve-month earnings of CN¥2.5b, we can expect this to reach CN¥4.0b by 2019. Below is a brief commentary around YY’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How will YY perform in the near future?
The longer term view from the 21 analysts covering YY 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.
This results in an annual growth rate of 29% based on the most recent earnings level of CN¥2.5b to the final forecast of CN¥4.9b by 2021. This leads to an EPS of CN¥51.87 in the final year of projections relative to the current EPS of CN¥42.03. Margins are currently sitting at 22%, which is expected to expand to 33% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For YY, I’ve put together three key 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 YY 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 YY is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of YY? 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 email@example.com.