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What Should We Expect From China Evergrande Group's (HKG:3333) Earnings In The Year Ahead?

Simply Wall St

In December 2018, China Evergrande Group (HKG:3333) released its earnings update. Generally, analysts seem fairly confident, as a 42% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of 27%. Presently, with latest-twelve-month earnings at CN¥37b, we should see this growing to CN¥53b by 2020. Below is a brief commentary on the longer term outlook the market has for China Evergrande Group. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for China Evergrande Group

How is China Evergrande Group going to perform in the near future?

The longer term expectations from the 15 analysts of 3333 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 understand the overall trajectory of 3333's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

SEHK:3333 Past and Future Earnings, August 27th 2019

From the current net income level of CN¥37b and the final forecast of CN¥69b by 2022, the annual rate of growth for 3333’s earnings is 19%. EPS reaches CN¥5.12 in the final year of forecast compared to the current CN¥2.85 EPS today. With a current profit margin of 8.0%, this movement will result in a margin of 9.5% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For China Evergrande Group, I've put together three key aspects 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 China Evergrande 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 China Evergrande Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of China Evergrande 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!

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.