In March 2018, Ashok Leyland Limited (NSEI:ASHOKLEY) released its latest earnings announcement, which confirmed that the business benefited from a strong tailwind, eventuating to a double-digit earnings growth of 11.27%. Today I want to provide a brief commentary on how market analysts perceive Ashok Leyland’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in. See our latest analysis for Ashok Leyland

Market analysts’ consensus outlook for the upcoming year seems optimistic, with earnings rising by a robust 10.50%. This growth seems to continue into the following year with rates reaching double digit 36.00% compared to today’s earnings, and finally hitting ₹25.00B by 2021.

While it’s informative understanding the growth rate each year relative to today’s figure, it may be more valuable gauging the rate at which the business is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Ashok Leyland’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 13.75%. This means that, we can assume Ashok Leyland will grow its earnings by 13.75% every year for the next couple of years.

Next Steps:

For Ashok Leyland, I’ve put together three pertinent 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 ASHOKLEY 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 ASHOKLEY is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ASHOKLEY? 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.