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Country Garden Holdings Company Limited (HKG:2007): Poised For Long Term Success?

Simply Wall St

After Country Garden Holdings Company Limited's (HKG:2007) earnings announcement in December 2018, the consensus outlook from analysts appear fairly confident, with profits predicted to increase by 22% next year, though this is evidently lower than the historical 5-year average earnings growth of 32%. By 2020, we can expect Country Garden Holdings’s bottom line to reach CN¥42b, a jump from the current trailing-twelve-month of CN¥35b. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Country Garden Holdings in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Country Garden Holdings

Exciting times ahead?

The longer term view from the 23 analysts covering 2007 is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. 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.

SEHK:2007 Past and Future Earnings, August 21st 2019

From the current net income level of CN¥35b and the final forecast of CN¥56b by 2022, the annual rate of growth for 2007’s earnings is 16%. This leads to an EPS of CN¥2.56 in the final year of projections relative to the current EPS of CN¥1.61. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 9.1% to 8.6% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Country Garden Holdings, there are three relevant 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 Country Garden 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 Country Garden Holdings is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Country Garden 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.