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GreenTree Hospitality Group Ltd. (NYSE:GHG): Is It A Smart Long Term Opportunity?

Simply Wall St

Based on GreenTree Hospitality Group Ltd.'s (NYSE:GHG) earnings update on 30 June 2019, it seems that analyst forecasts are fairly in-line with historical trends, with earnings growth rate expected to be 18% in the upcoming year, relative to the past five-year average earnings growth of 19% per year. By 2020, we can expect GreenTree Hospitality Group’s bottom line to reach CN¥465m, a jump from the current trailing-twelve-month of CN¥394m. Below is a brief commentary on the longer term outlook the market has for GreenTree Hospitality Group. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for GreenTree Hospitality Group

Can we expect GreenTree Hospitality Group to keep growing?

The 6 analysts covering GHG view its longer term outlook with a 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 GHG'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.

NYSE:GHG Past and Future Earnings, August 18th 2019

This results in an annual growth rate of 12% based on the most recent earnings level of CN¥394m to the final forecast of CN¥570m by 2022. EPS reaches CN¥6.84 in the final year of forecast compared to the current CN¥3.97 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 42% to 40% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For GreenTree Hospitality Group, there are three fundamental factors you should further research:

  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 GreenTree Hospitality Group 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 GreenTree Hospitality Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GreenTree Hospitality Group? 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 editorial-team@simplywallst.com. 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.