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After ITC Limited’s (NSE:ITC) earnings announcement in March 2018, analysts seem fairly confident, as a 11% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of 6.7%. Currently with trailing-twelve-month earnings of ₹112.7b, we can expect this to reach ₹124.7b by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
View our latest analysis for ITC
How will ITC perform in the near future?
The longer term expectations from the 19 analysts of ITC is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of ITC’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 11% based on the most recent earnings level of ₹112.7b to the final forecast of ₹155.0b by 2021. This leads to an EPS of ₹12.78 in the final year of projections relative to the current EPS of ₹9.26. The main reason for growth is a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 26%, this movement will result in a margin of 29% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For ITC, I’ve compiled three essential factors 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 ITC 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 ITC 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 ITC? 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.