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The Federal Bank Limited’s (NSE:FEDERALBNK) released its most recent earnings update in March 2018, which suggested that the business experienced a small tailwind, leading to a single-digit earnings growth of 7.9%. Below, I’ve laid out key numbers on how market analysts perceive Federal Bank’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Check out our latest analysis for Federal Bank
Analysts’ outlook for the coming year seems buoyant, with earnings climbing by a robust 32.6%. This growth seems to continue into the following year with rates arriving at double digit 71.8% compared to today’s earnings, and finally hitting ₹19.91b by 2021.
While it’s useful to understand the growth each year relative to today’s figure, it may be more insightful determining the rate at which the company is moving on average every year. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of Federal Bank’s earnings trajectory over time, 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 21.6%. This means, we can expect Federal Bank will grow its earnings by 21.6% every year for the next couple of years.
Next Steps:
For Federal Bank, there are three relevant factors 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 FEDERALBNK 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 FEDERALBNK 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 FEDERALBNK? 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.