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Looking at Towngas China Company Limited’s (HKG:1083) earnings update on 30 June 2018, analysts seem fairly confident, with earnings expected to grow by 6.2% in the upcoming year relative to the past 5-year average growth rate of 3.5%. By 2019, we can expect Towngas China’s bottom line to reach HK$1.5b, a jump from the current trailing-twelve-month HK$1.4b. Below is a brief commentary on the longer term outlook the market has for Towngas China. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
View our latest analysis for Towngas China
What can we expect from Towngas China in the longer term?
Over the next three years, it seems the consensus view of the 10 analysts covering 1083 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. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of 1083’s earnings growth over these next few years.
By 2021, 1083’s earnings should reach HK$1.6b, from current levels of HK$1.4b, resulting in an annual growth rate of 8.4%. This leads to an EPS of HK$0.61 in the final year of projections relative to the current EPS of HK$0.50. The bottom-line growth seems to be caused by a high top-line growth of 10.0% falling down into the bottom line. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 16% to 15% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Towngas China, I’ve compiled three key 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 Towngas China 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 Towngas China 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 Towngas China? 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.