The latest earnings announcement Virscend Education Company Limited (HKG:1565) released in December 2017 indicated that the company gained from a small tailwind, eventuating to a single-digit earnings growth of 1.35%. Today I want to provide a brief commentary on how market analysts view Virscend Education’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. See our latest analysis for Virscend Education
Market analysts’ consensus outlook for this coming year seems buoyant, with earnings rising by a robust 30.07%. This growth seems to continue into the following year with rates reaching double digit 77.60% compared to today’s earnings, and finally hitting HK$753.67m by 2021.
Although it is useful to be aware of the growth year by year relative to today’s figure, it may be more beneficial to estimate the rate at which the company is moving every year, on average. The benefit of this approach is that we can get a better picture of the direction of Virscend Education’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 29.71%. This means that, we can assume Virscend Education will grow its earnings by 29.71% every year for the next couple of years.
For Virscend Education, there are three pertinent aspects 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 1565 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 1565 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 1565? 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.