Industrial and Commercial Bank of China Limited's (HKG:1398) announced its latest earnings update in December 2018, which showed that the company gained from a small tailwind, eventuating to a single-digit earnings growth of 4.1%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Industrial and Commercial Bank of China'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' prospects for this coming year seems rather muted, with earnings climbing by a single digit 7.3%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 13% compared to today’s earnings, and finally hitting CN¥349b by 2022.
Although it is useful to understand the growth year by year relative to today’s level, it may be more valuable estimating the rate at which the business is rising or falling on average every year. The benefit of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Industrial and Commercial Bank of China's earnings trajectory over time, which may be more relevant for long term investors. To compute 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 5.1%. This means that, we can presume Industrial and Commercial Bank of China will grow its earnings by 5.1% every year for the next couple of years.
For Industrial and Commercial Bank of China, I've put together three key factors 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 1398 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 1398 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 1398? 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.