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Will Nexteer Automotive Group Limited's (HKG:1316) Earnings Grow In The Year Ahead?

Simply Wall St

In December 2018, Nexteer Automotive Group Limited (HKG:1316) released its earnings update. Generally, analyst consensus outlook appear cautiously subdued, with profits predicted to rise by -4.2% next year against the higher past 5-year average growth rate of 24%. Presently, with latest-twelve-month earnings at US$380m, we should see this growing to US$364m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Nexteer Automotive Group in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Nexteer Automotive Group

Can we expect Nexteer Automotive Group to keep growing?

The longer term view from the 17 analysts covering 1316 is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of 1316's earnings growth over these next few years.

SEHK:1316 Past and Future Earnings, April 18th 2019

This results in an annual growth rate of 3.4% based on the most recent earnings level of US$380m to the final forecast of US$413m by 2022. This leads to an EPS of $0.17 in the final year of projections relative to the current EPS of $0.15. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 9.7% to 9.2% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Nexteer Automotive Group, there are three essential aspects you should further research:

  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 Nexteer Automotive Group 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 Nexteer Automotive Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Nexteer Automotive Group? 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.