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Looking at Rural Electrification Corporation Limited’s (NSE:RECLTD) earnings update in March 2018, analysts seem fairly confident, as a 11.92% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of 8.57%. By 2019, we can expect Rural Electrification’s bottom line to reach ₹52.49b, a jump from the current ₹46.89b. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Rural Electrification in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here. Check out our latest analysis for Rural Electrification
Can we expect Rural Electrification to keep growing?
The view from 7 analysts over the next three years 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. 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 RECLTD’s earnings growth over these next few years.
From the current net income level of ₹46.89b and the final forecast of ₹70.48b by 2021, the annual rate of growth for RECLTD’s earnings is 13.70%. EPS reaches ₹35.69 in the final year of forecast compared to the current ₹23.75 EPS today. Growth in the bottom line seems to suggest a higher revenue growth of 14.11% outpacing cost increases. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 59.96% to 57.01% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Rural Electrification, there are three fundamental factors you should look at:
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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.
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Valuation: What is Rural Electrification 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 Rural Electrification is currently mispriced by the market.
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Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Rural Electrification? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.