East West Bancorp, Inc.’s (NASDAQ:EWBC) latest earnings announcement in December 2018 revealed that the business experienced a strong tailwind, leading to a double-digit earnings growth of 39%. Today I want to provide a brief commentary on how market analysts view East West Bancorp’s earnings growth outlook over the next couple of 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.
Market analysts’ consensus outlook for the coming year seems rather muted, with earnings expanding by a single digit 5.6%. The growth outlook in the following year seems much more optimistic with rates reaching double digit 12% compared to today’s earnings, and finally hitting US$892m by 2022.
Although it’s useful to understand the growth rate each year relative to today’s value, it may be more beneficial to estimate the rate at which the earnings are growing every year, on average. The benefit of this method is that we can get a bigger picture of the direction of East West Bancorp’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 inserted 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 6.4%. This means, we can presume East West Bancorp will grow its earnings by 6.4% every year for the next few years.
For East West Bancorp, I’ve put together three fundamental factors you should look at:
- 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.
- Valuation: What is EWBC 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 EWBC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of EWBC? 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 firstname.lastname@example.org. 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.