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BAIC Motor Corporation Limited (HKG:1958): Is It A Good Long Term Opportunity?

Simply Wall St

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The most recent earnings update BAIC Motor Corporation Limited's (HKG:1958) released in December 2018 confirmed that the company experienced a strong tailwind, leading to a high double-digit earnings growth of 92%. Below, I've laid out key numbers on how market analysts view BAIC Motor's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

View our latest analysis for BAIC Motor

Market analysts' prospects for the upcoming year seems optimistic, with earnings climbing by a robust 18%. This growth seems to continue into the following year with rates arriving at double digit 41% compared to today’s earnings, and finally hitting CN¥6.1b by 2022.

SEHK:1958 Past and Future Earnings, June 12th 2019

Although it is helpful to understand the growth year by year relative to today’s level, it may be more insightful to gauge the rate at which the company is moving on average every year. The advantage of this approach is that we can get a better picture of the direction of BAIC Motor's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute 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 11%. This means, we can presume BAIC Motor will grow its earnings by 11% every year for the next few years.

Next Steps:

For BAIC Motor, I've put together three important factors you should further research:

  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 1958 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 1958 is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 1958? 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 editorial-team@simplywallst.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.