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Looking at The Bank of East Asia, Limited's (HKG:23) earnings update in December 2018, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 4.9% next year compared with the past 5-year average growth rate of -6.1%. With trailing-twelve-month net income at current levels of HK$5.8b, we should see this rise to HK$6.1b in 2020. Below is a brief commentary on the longer term outlook the market has for Bank of East Asia. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Check out our latest analysis for Bank of East Asia
What can we expect from Bank of East Asia in the longer term?
The view from 10 analysts over the next three years 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 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.
From the current net income level of HK$5.8b and the final forecast of HK$6.6b by 2022, the annual rate of growth for 23’s earnings is 4.5%. This leads to an EPS of HK$2.28 in the final year of projections relative to the current EPS of HK$2.07. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 37% to 33% by the end of 2022.
Next Steps:
Future outlook is only one aspect when you're building an investment case for a stock. For Bank of East Asia, I've put together three relevant aspects you should further research:
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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 Bank of East Asia 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 Bank of East Asia 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 Bank of East Asia? 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.