U.S. Markets closed

What Should We Expect From Alibaba Group Holding Limited’s (NYSE:BABA) Earnings In The Next Couple Of Years?

Mercedes Harden

Alibaba Group Holding Limited’s (NYSE:BABA) announced its latest earnings update in March 2018, which suggested that the business benefited from a strong tailwind, leading to a double-digit earnings growth of 46.50%. Below, I’ve laid out key numbers on how market analysts predict Alibaba Group Holding’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. See our latest analysis for Alibaba Group Holding

Analysts’ expectations for this coming year seems optimistic, with earnings expanding by a robust 20.39%. This growth seems to continue into the following year with rates reaching double digit 62.50% compared to today’s earnings, and finally hitting CN¥147.94B by 2021.

NYSE:BABA Future Profit May 11th 18

While it’s useful to understand the growth year by year relative to today’s value, it may be more valuable determining the rate at which the business is rising or falling every year, on average. The benefit of this technique is that it ignores near term flucuations and accounts for the overarching direction of Alibaba Group Holding’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put 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 22.15%. This means that, we can expect Alibaba Group Holding will grow its earnings by 22.15% every year for the next couple of years.

Next Steps:

For Alibaba Group Holding, I’ve put together three relevant aspects you should further research:

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