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Based on ZTO Express (Cayman) Inc’s (NYSE:ZTO) earnings update in June 2018, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 17% in the upcoming year relative to the higher past 5-year average growth rate of 44%. Currently with trailing-twelve-month earnings of CN¥4.0b, we can expect this to reach CN¥4.7b by 2019. Below is a brief commentary on the longer term outlook the market has for ZTO Express (Cayman). For those interested in more of an analysis of the company, you can research its fundamentals here.
See our latest analysis for ZTO Express (Cayman)
Exciting times ahead?
Over the next three years, it seems the consensus view of the 17 analysts covering ZTO is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ZTO’s earnings growth over these next few years.
From the current net income level of CN¥3.2b and the final forecast of CN¥5.9b by 2021, the annual rate of growth for ZTO’s earnings is 21%. EPS reaches CN¥10.05 in the final year of forecast compared to the current CN¥4.41 EPS today. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. However, the expansion of the current 24% margin is not expected to be sustained, as it begins to contract to 23% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For ZTO Express (Cayman), I’ve put together three pertinent aspects you should further examine:
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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 ZTO Express (Cayman) 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 ZTO Express (Cayman) 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 ZTO Express (Cayman)? 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.