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Based on Raffles Medical Group Ltd’s (SGX:BSL) earnings update in June 2018, analyst forecasts seem pessimistic, with profits predicted to drop by -11.9% next year. Though this outlook is not unfounded, given the negative earnings growth rate over the past five years on average. With trailing-twelve-month net income at current levels of S$71.2m, the consensus growth rate suggests that earnings will decline to S$62.7m by 2019. Below is a brief commentary on the longer term outlook the market has for Raffles Medical Group. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Check out our latest analysis for Raffles Medical Group
How is Raffles Medical Group going to perform in the near future?
Over the next three years, it seems the consensus view of the 12 analysts covering BSL is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. 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 0.2% based on the most recent earnings level of S$70.8m to the final forecast of S$65.1m by 2021. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of SGD0.035 in the final year of forecast compared to the current SGD0.040 EPS today. The main reason for growth is a result of revenue expansion of 17.4% exceeeding cost growth over time. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 14.8% to 7.8% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Raffles Medical Group, I’ve compiled three key aspects 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 Raffles Medical 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 Raffles Medical Group 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 Raffles Medical 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!
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.