In March 2019, China Life Insurance Company Limited (HKG:2628) released its earnings update. Generally, it seems that analyst forecasts are substantially optimistic, with profits predicted to ramp up by an impressive 61% next year, against the historical 5-year average growth rate of -5.0%. With trailing-twelve-month net income at current levels of CN¥11b, we should see this rise to CN¥18b in 2020. Below is a brief commentary on the longer term outlook the market has for China Life Insurance. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How will China Life Insurance perform in the near future?
The longer term expectations from the 14 analysts of 2628 is tilted towards the 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 get an idea of the overall earnings growth trend for 2628, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of 12% based on the most recent earnings level of CN¥11b to the final forecast of CN¥22b by 2022. EPS reaches CN¥1.66 in the final year of forecast compared to the current CN¥0.39 EPS today. Analysts are predicting earnings growth to outpace revenue by the end of 2022, resulting in a margin expansion from 1.7% to 2.6%.
Future outlook is only one aspect when you're building an investment case for a stock. For China Life Insurance, I've compiled three key 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.
- Valuation: What is China Life Insurance 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 China Life Insurance is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of China Life Insurance? 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.