On 31 December 2018, ZTO Express (Cayman) Inc. (NYSE:ZTO) announced its earnings update. Overall, the consensus outlook from analysts appear somewhat bearish, with profits predicted to rise by 12% next year compared with the higher past 5-year average growth rate of 42%. With trailing-twelve-month net income at current levels of CN¥4.4b, we should see this rise to CN¥4.9b in 2020. Below is a brief commentary around ZTO Express (Cayman)'s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How is ZTO Express (Cayman) going to perform in the near future?
Longer term expectations from the 15 analysts covering ZTO’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of CN¥4.4b and the final forecast of CN¥6.6b by 2022, the annual rate of growth for ZTO’s earnings is 13%. EPS reaches CN¥8.1 in the final year of forecast compared to the current CN¥5.83 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 25% to 20% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For ZTO Express (Cayman), I've put together three relevant aspects 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 ZTO Express (Cayman) 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 ZTO Express (Cayman) is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ZTO Express (Cayman)? 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.