Since Essex Bio-Technology Limited (HKG:1061) released its earnings in June 2018, analysts seem fairly confident, with profits predicted to increase by 21% next year, though this is relatively lower than the past 5-year average earnings growth of 27%. With trailing-twelve-month net income at current levels of HK$189m, we should see this rise to HK$229m in 2019. Below is a brief commentary on the longer term outlook the market has for Essex Bio-Technology. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Essex Bio-Technology

Can we expect Essex Bio-Technology to keep growing?

The longer term view from the 2 analysts covering 1061 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 understand the overall trajectory of 1061’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

This results in an annual growth rate of 18% based on the most recent earnings level of HK$167m to the final forecast of HK$286m by 2021. EPS reaches HK$0.53 in the final year of forecast compared to the current HK$0.30 EPS today. The bottom-line growth seems to be caused by cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, 1061’s profit margin will have expanded from 19% to 20%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Essex Bio-Technology, I’ve put together three pertinent factors you should further examine:

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 Essex Bio-Technology 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 Essex Bio-Technology is currently mispriced by the market.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Essex Bio-Technology? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.