Looking at Yancoal Australia Ltd's (ASX:YAL) earnings update in December 2018, analyst forecasts seem pessimistic, as a 14% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 67%. With trailing-twelve-month net income at current levels of AU$852m, the consensus growth rate suggests that earnings will decline to AU$736m by 2020. Below is a brief commentary around Yancoal Australia's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Exciting times ahead?
The longer term view from the 3 analysts covering YAL is one of negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of -14% based on the most recent earnings level of AU$852m to the final forecast of AU$544m by 2022. This leads to an EPS of A$0.41 in the final year of projections relative to the current EPS of A$0.68. Earnings decline appears to be a result of a falling top-line, with negative growth of -3.3%. With earnings declining at a faster rate over time, margins is expected to contract from 18% to 12% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Yancoal Australia, I've compiled 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 Yancoal Australia 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 Yancoal Australia is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Yancoal Australia? 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.