Based on Sinopec Kantons Holdings Limited’s (SEHK:934) earnings update in December 2017, it seems that analyst expectations are fairly bearish, as a 19.97% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 25.56%. Currently with earnings of HK$1.21B, we can expect this to reach HK$1.45B by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here. Check out our latest analysis for Sinopec Kantons Holdings

What can we expect from Sinopec Kantons Holdings in the longer term?

The longer term view from the 12 analysts covering 934 is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around 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.

By 2021, 934’s earnings should reach HK$1.80B, from current levels of HK$1.21B, resulting in an annual growth rate of 13.58%. EPS reaches HK$0.72 in the final year of forecast compared to the current HK$0.49 EPS today. Earnings growth appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 69.85%, this movement will result in a margin of 78.09% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Sinopec Kantons Holdings, there are three fundamental aspects you should further examine:

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 Sinopec Kantons Holdings 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 Sinopec Kantons Holdings is currently mispriced by the market.

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