In March 2018, Cholamandalam Investment and Finance Company Limited (NSE:CHOLAFIN) released its earnings update. Generally, the consensus outlook from analysts appear fairly confident, with earnings expected to grow by 27% in the upcoming year relative to the past 5-year average growth rate of 23%. Currently with trailing-twelve-month earnings of ₹9.8b, we can expect this to reach ₹12.4b by 2019. Below is a brief commentary on the longer term outlook the market has for Cholamandalam Investment and Finance. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Can we expect Cholamandalam Investment and Finance to keep growing?
Longer term expectations from the 14 analysts covering CHOLAFIN’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for CHOLAFIN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of ₹9.8b and the final forecast of ₹17.8b by 2021, the annual rate of growth for CHOLAFIN’s earnings is 17%. EPS reaches ₹113.74 in the final year of forecast compared to the current ₹62.41 EPS today. Growth in earnings appears to be a result of a high top-line growth of 18% falling down into the bottom line. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 34% to 33% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Cholamandalam Investment and Finance, there are three important aspects you should further research:
- 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 Cholamandalam Investment and Finance 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 Cholamandalam Investment and Finance is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Cholamandalam Investment and Finance? 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 past 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. For errors that warrant correction please contact the editor at email@example.com.