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BOC Hong Kong (Holdings) Limited (HKG:2388): Is It A Smart Long Term Opportunity?

Simply Wall St

In December 2018, BOC Hong Kong (Holdings) Limited (HKG:2388) announced its earnings update. Overall, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 4.6% next year relative to the higher past 5-year average growth rate of 7.8%. By 2020, we can expect BOC Hong Kong (Holdings)’s bottom line to reach HK$33b, a jump from the current trailing-twelve-month of HK$32b. Below is a brief commentary around BOC Hong Kong (Holdings)'s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for BOC Hong Kong (Holdings)

Exciting times ahead?

The view from 11 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of 2388's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

SEHK:2388 Past and Future Earnings, August 29th 2019

This results in an annual growth rate of 5.5% based on the most recent earnings level of HK$32b to the final forecast of HK$38b by 2022. EPS reaches HK$3.51 in the final year of forecast compared to the current HK$3.03 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 60% to 59% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For BOC Hong Kong (Holdings), I've put together three essential aspects you should look at:

  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 BOC Hong Kong (Holdings) 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 BOC Hong Kong (Holdings) is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BOC Hong Kong (Holdings)? 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.