What Should We Expect From NetEase Inc’s (NASDAQ:NTES) Earnings In The Years Ahead?
In December 2017, NetEase Inc (NASDAQ:NTES) released its latest earnings announcement, which suggested that the business endured a minor headwind with earnings falling from CN¥11,604.5M to CN¥10,707.9M, a change of -7.73%. Below, I’ve laid out key numbers on how market analysts predict NetEase’s earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. See our latest analysis for NetEase
Analysts’ expectations for this coming year seems rather muted, with earnings climbing by a single digit 7.69%. The growth outlook in the following year seems much more optimistic with rates generating double digit 25.66% compared to today’s earnings, and finally hitting CN¥14.58B by 2021.
Even though it’s helpful to understand the rate of growth year by year relative to today’s value, it may be more beneficial analyzing the rate at which the earnings are growing on average every year. The advantage of this technique is that we can get a better picture of the direction of NetEase’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 10.27%. This means, we can expect NetEase will grow its earnings by 10.27% every year for the next couple of years.
Next Steps:
For NetEase, there are three relevant factors you should look at:
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 NTES 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 NTES is currently mispriced by the market.
3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NTES? 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.
