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In December 2018, MTR Corporation Limited (HKG:66) released its latest earnings announcement, which indicated that the company experienced a minor headwind with earnings declining from HK$17b to HK$16b, a change of -4.9%. Below is my commentary, albeit very simple and high-level, on how market analysts predict MTR's earnings growth outlook over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for MTR

Analysts' expectations for this coming year seems pessimistic, with earnings reducing by a double-digit -20%. Beyond this, earnings are predicted to continue to be below today's level, with a decline of -15% in 2021, eventually reaching HK$14b in 2022.

Although it’s helpful to be aware of the rate of growth each year relative to today’s level, it may be more valuable estimating the rate at which the business is moving every year, on average. The benefit of this method is that we can get a bigger picture of the direction of MTR's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 0.03%. This means that, we can expect MTR will grow its earnings by 0.03% every year for the next couple of years.

Next Steps:

For MTR, I've put together three key aspects you should further research:

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 66 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 66 is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 66? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.