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What Should You Know About Cipla Limited's (NSE:CIPLA) Future?

Simply Wall St

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Cipla Limited's (NSE:CIPLA) announced its latest earnings update in May 2019, which revealed that the business benefited from a slight tailwind, leading to a single-digit earnings growth of 8.3%. Below, I've laid out key growth figures on how market analysts view Cipla's earnings growth trajectory over the next few 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.

Check out our latest analysis for Cipla

Analysts' expectations for this coming year seems positive, with earnings expanding by a robust 25%. This growth seems to continue into the following year with rates arriving at double digit 48% compared to today’s earnings, and finally hitting ₹23b by 2022.

NSEI:CIPLA Past and Future Earnings, July 19th 2019

Although it’s useful to understand the rate of growth each year relative to today’s level, it may be more insightful to evaluate the rate at which the business is rising or falling on average every year. The pro of this approach is that we can get a better picture of the direction of Cipla's earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute this rate, I put 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 18%. This means that, we can assume Cipla will grow its earnings by 18% every year for the next couple of years.

Next Steps:

For Cipla, I've put together three relevant factors you should further examine:

  1. 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.
  2. Valuation: What is CIPLA 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 CIPLA is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CIPLA? 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 editorial-team@simplywallst.com. 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.