Since LIC Housing Finance Limited (NSE:LICHSGFIN) released its earnings in March 2018, analysts seem fairly confident, with profits predicted to increase by 15.5% next year against the past 5-year average growth rate of 13.2%. Presently, with latest-twelve-month earnings at ₹20.14b, we should see this growing to ₹23.26b by 2019. Below is a brief commentary on the longer term outlook the market has for LIC Housing Finance. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for LIC Housing Finance

Exciting times ahead?

The longer term view from the 30 analysts covering LICHSGFIN 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.

From the current net income level of ₹20.14b and the final forecast of ₹31.31b by 2021, the annual rate of growth for LICHSGFIN’s earnings is 13.4%. This leads to an EPS of ₹62.21 in the final year of projections relative to the current EPS of ₹39.91. The primary reason for earnings growth is due to a higher revenue growth of 14.4% outpacing cost increases. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 53.7% to 51.8% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For LIC Housing Finance, I’ve compiled three essential factors 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 LIC Housing Finance 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 LIC Housing Finance is currently mispriced by the market.

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