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Charter Hall Group (ASX:CHC): Are Analysts’ Forecast Signalling Trouble Ahead?

Brandon Murphy

In June 2018, Charter Hall Group (ASX:CHC) released its earnings update. Generally, analyst consensus outlook seem pessimistic, as a -18% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 28%. With trailing-twelve-month net income at current levels of AU$251m, the consensus growth rate suggests that earnings will decline to AU$207m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Charter Hall Group

Can we expect Charter Hall Group to keep growing?

The longer term expectations from the 7 analysts of CHC is tilted towards the 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.

ASX:CHC Future Profit January 24th 19

By 2022, CHC’s earnings should reach AU$252m, from current levels of AU$251m, resulting in an annual growth rate of 1.2%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of A$0.52 in the final year of forecast compared to the current A$0.54 EPS today. Analysts are predicting earnings growth to outpace revenue by the end of 2022, resulting in a margin expansion from 60% to 61%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Charter Hall Group, I’ve compiled three essential factors 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 Charter Hall Group 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 Charter Hall Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Charter Hall Group? 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 editorial-team@simplywallst.com.