HSBC Holdings plc (LON:HSBA): What Are The Future Prospects?
After HSBC Holdings plc’s (LON:HSBA) earnings announcement in June 2018, the consensus outlook from analysts appear fairly confident, as a 46% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of -23%. With trailing-twelve-month net income at current levels of US$9.9b, we should see this rise to US$14.4b in 2019. Below is a brief commentary on the longer term outlook the market has for HSBC Holdings. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
See our latest analysis for HSBC Holdings
What can we expect from HSBC Holdings in the longer term?
The 19 analysts covering HSBA view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. 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.
From the current net income level of US$9.7b and the final forecast of US$16.1b by 2021, the annual rate of growth for HSBA’s earnings is 7.8%. This leads to an EPS of $0.80 in the final year of projections relative to the current EPS of $0.48. The bottom-line growth seems to be caused by cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 20%, this movement will result in a margin of 27% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For HSBC Holdings, I’ve put together three essential factors you should look at:
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 HSBC Holdings 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 HSBC Holdings is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of HSBC Holdings? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
