In September 2017, YY Inc (NASDAQ:YY) announced its latest earnings update. Overall, the consensus outlook from analysts appear somewhat bearish, with profits predicted to rise by 17.85% next year against the higher past 5-year average growth rate of 37.70%. Presently, with earnings at CN¥1,523.9M, we should see this growing to CN¥1,795.9M by 2018. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for YY in the longer term. Investors wanting to learn more about other aspects of YY should research its fundamentals here. See our latest analysis for YY
What can we expect from YY in the longer term?
The view from 20 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of YY’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.
By 2020, YY’s earnings should reach CN¥2,480.9M, from current levels of CN¥1,523.9M, resulting in an annual growth rate of 15.90%. This leads to an EPS of CN¥60.65 in the final year of projections relative to the current EPS of CN¥27.04. The main reason for growth is a result of a higher revenue growth of 16.62% outpacing cost increases. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 18.58% to 17.26% by the end of 2020.
Future outlook is only one aspect when you’re building an investment case for a stock. For YY, there are three key 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 YY 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 YY is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of YY? 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.