On 30 June 2018, Health Management International Ltd (SGX:588) released its earnings update. Generally, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 9.4% next year relative to the higher past 5-year average growth rate of 27.3%. With trailing-twelve-month net income at current levels of RM60.6m, we should see this rise to RM66.3m in 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Health Management International in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
See our latest analysis for Health Management International
Exciting times ahead?
Over the next three years, it seems the consensus view of the 5 analysts covering 588 is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for 588, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of 8.1% based on the most recent earnings level of RM60.6m to the final forecast of RM75.0m by 2021. EPS reaches MYR0.088 in the final year of forecast compared to the current MYR0.073 EPS today. Growth in earnings appears to be a result of top-line expansion of 9.2%, dropping down to the bottome-line. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 13.0% to 12.2% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Health Management International, I’ve compiled three important aspects you should look at:
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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 Health Management International 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 Health Management International 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 Health Management International? 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.