Luk Fook Holdings (International) Limited's (HKG:590) released its most recent earnings update in July 2019, which revealed that the company experienced a small tailwind, eventuating to a single-digit earnings growth of 9.0%. Below is a brief commentary on my key takeaways on how market analysts view Luk Fook Holdings (International)'s earnings growth outlook 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.
Market analysts' prospects for next year seems rather subdued, with earnings expanding by a single digit 4.2%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 13% compared to today’s earnings, and finally hitting HK$1.7b by 2022.
Even though it’s useful to understand the growth each year relative to today’s figure, it may be more beneficial to evaluate the rate at which the company is moving on average every year. The pro of this method is that we can get a bigger picture of the direction of Luk Fook Holdings (International)'s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put 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 5.6%. This means that, we can expect Luk Fook Holdings (International) will grow its earnings by 5.6% every year for the next few years.
For Luk Fook Holdings (International), I've compiled 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.
- Valuation: What is 590 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 590 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 590? 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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