Based on Yirendai Ltd.'s (NYSE:YRD) recently announced earnings update on 31 December 2018, analyst consensus outlook seem pessimistic, with earnings expected to decline by 2.3% in the upcoming year relative to the past 5-year average growth rate of 45%. With trailing-twelve-month net income at current levels of CN¥967m, the consensus growth rate suggests that earnings will decline to CN¥944m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Yirendai in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
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How will Yirendai perform in the near future?
Over the next three years, it seems the consensus view of the 9 analysts covering YRD is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. 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 YRD's earnings growth over these next few years.
This results in an annual growth rate of 9.6% based on the most recent earnings level of CN¥967m to the final forecast of CN¥1.2b by 2022. This leads to an EPS of CN¥18.89 in the final year of projections relative to the current EPS of CN¥15.81. In 2022, YRD's profit margin will have expanded from 17% to 20%.
Future outlook is only one aspect when you're building an investment case for a stock. For Yirendai, there are three pertinent 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 Yirendai 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 Yirendai is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Yirendai? 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 email@example.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.