Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

In December 2018, Colour Life Services Group Co., Limited (HKG:1778) released its earnings update. Generally, analysts seem cautiously optimistic, with profits predicted to increase by 24% next year, though this is noticeably lower than the historical 5-year average earnings growth of 34%. Currently with trailing-twelve-month earnings of CN¥485m, we can expect this to reach CN¥603m by 2020. Below is a brief commentary around Colour Life Services Group's earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Colour Life Services Group

What can we expect from Colour Life Services Group in the longer term?

The longer term view from the 10 analysts covering 1778 is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. 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.

This results in an annual growth rate of 20% based on the most recent earnings level of CN¥485m to the final forecast of CN¥895m by 2022. This leads to an EPS of CN¥0.68 in the final year of projections relative to the current EPS of CN¥0.38. Margins are currently sitting at 13%, which is expected to expand to 17% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Colour Life Services Group, I've compiled three fundamental factors you should look at:

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 Colour Life Services Group 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 Colour Life Services Group is currently mispriced by the market.

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