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The latest earnings update HK Electric Investments and HK Electric Investments Limited (HKG:2638) released in December 2018 indicated that the company experienced a minor headwind with earnings declining from HK$3.3b to HK$3.1b, a change of -8.7%. Investors may find it useful to understand how market analysts predict HK Electric Investments and HK Electric Investments's earnings growth outlook over the next couple of years and whether the future looks brighter. 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 HK Electric Investments and HK Electric Investments

Analysts' outlook for the coming year seems pessimistic, with earnings decreasing by a double-digit -17%. In the next couple of years, earnings should continue to be below today's level, with a decline of -13% in 2021, eventually reaching HK$2.7b in 2022.

While it’s informative understanding the rate of growth year by year relative to today’s level, it may be more valuable estimating the rate at which the business is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of HK Electric Investments and HK Electric Investments's earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. 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 -4.8%. This means that, we can anticipate HK Electric Investments and HK Electric Investments will chip away at a rate of -4.8% every year for the next couple of years.

Next Steps:

For HK Electric Investments and HK Electric Investments, I've put together three important factors you should further research:

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 2638 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 2638 is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 2638? 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.