The latest earnings release China Yuchai International Limited’s (NYSE:CYD) announced in December 2018 revealed that the business experienced a significant headwind with earnings deteriorating by -27%. Investors may find it useful to understand how market analysts view China Yuchai International’s earnings growth trajectory over the next couple of years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for this coming year seems rather subdued, with earnings expanding by a single digit 0.5%. The growth outlook in the following year seems much more positive with rates arriving at double digit 34% compared to today’s earnings and reduces to CN¥777m by 2022.
Even though it’s informative understanding the growth rate year by year relative to today’s figure, it may be more insightful to determine the rate at which the earnings are moving every year, on average. The advantage of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of China Yuchai International’s earnings trajectory over time, be more volatile. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 9.3%. This means that, we can assume China Yuchai International will grow its earnings by 9.3% every year for the next few years.
For China Yuchai International, there are three fundamental aspects you should further research:
- 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 CYD 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 CYD is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CYD? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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