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The latest earnings release CNOOC Limited’s (HKG:883) announced in December 2018 confirmed that the business experienced a significant tailwind, more than doubling its earnings from the prior year. Below, I’ve laid out key growth figures on how market analysts perceive CNOOC’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
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Market analysts’ consensus outlook for next year seems pessimistic, with earnings reducing by -3.8%. But in the following year, there is a complete contrast in performance, with reaching double digit 6.8% compared to today’s level and continues to increase to CN¥63b in 2022.
Even though it is helpful to understand the rate of growth year by year relative to today’s value, it may be more insightful gauging the rate at which the earnings are growing on average every year. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of CNOOC’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 4.7%. This means, we can presume CNOOC will grow its earnings by 4.7% every year for the next few years.
Next Steps:
For CNOOC, I’ve put together three relevant factors you should further research:
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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 883 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 883 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 883? 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.