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Since CapitaLand Limited (SGX:C31) released its earnings in March 2019, analyst forecasts appear to be pessimistic, with earnings expected to decline by 15% in the upcoming year relative to the past 5-year average growth rate of 13%. With trailing-twelve-month net income at current levels of S$1.8b, the consensus growth rate suggests that earnings will decline to S$1.5b by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for CapitaLand in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is CapitaLand going to perform in the near future?
The longer term view from the 17 analysts covering C31 is one of positive 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.
From the current net income level of S$1.8b and the final forecast of S$1.8b by 2022, the annual rate of growth for C31’s earnings is 6.8%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of SGD0.36 in the final year of forecast compared to the current SGD0.42 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 31% to 22% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For CapitaLand, I've put together three relevant factors you should further examine:
- 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.
- Future Earnings: How does CapitaLand's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CapitaLand? 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.