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China Resources Cement Holdings Limited (HKG:1313): Are Analysts Right About The Drop In Earnings?

Simply Wall St

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The most recent earnings update China Resources Cement Holdings Limited's (HKG:1313) released in December 2018 revealed that the company experienced a significant tailwind, more than doubling its earnings from the prior year. Today I want to provide a brief commentary on how market analysts predict China Resources Cement Holdings's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for China Resources Cement Holdings

Market analysts' consensus outlook for the upcoming year seems pessimistic, with earnings reducing by -2.0%. In the next couple of years, earnings are expected to continue to be below today's level, with a decrease of -1.7% in 2021, eventually reaching HK$7.8b in 2022.

SEHK:1313 Past and Future Earnings, April 6th 2019

Even though it is informative knowing the growth each year relative to today’s figure, it may be more beneficial determining the rate at which the earnings are growing on average every year. The benefit of this technique is that we can get a bigger picture of the direction of China Resources Cement Holdings's earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate this rate, I've inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -1.7%. This means, we can presume China Resources Cement Holdings will chip away at a rate of -1.7% every year for the next few years.

Next Steps:

For China Resources Cement Holdings, I've put together three essential factors you should further examine:

  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 1313 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 1313 is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 1313? 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.