In June 2018, Nine Dragons Paper (Holdings) Limited (HKG:2689) announced its most recent earnings update, which revealed that the business gained from a large tailwind, leading to a high double-digit earnings growth of 79%. Below is a brief commentary on my key takeaways on how market analysts predict Nine Dragons Paper (Holdings)’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. 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 Nine Dragons Paper (Holdings)

Market analysts’ prospects for next year seems pessimistic, with earnings reducing by a double-digit -21%. In the next couple of years, earnings are expected to continue to be below today’s level, with a decline of -17% in 2020, eventually reaching CN¥6.5b in 2021.

Even though it’s informative understanding the growth rate each year relative to today’s figure, it may be more valuable to gauge the rate at which the earnings are rising or falling on average every year. The benefit of this technique is that we can get a bigger picture of the direction of Nine Dragons Paper (Holdings)’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put 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 -3.1%. This means that, we can assume Nine Dragons Paper (Holdings) will chip away at a rate of -3.1% every year for the next few years.

Next Steps:

For Nine Dragons Paper (Holdings), I’ve compiled three relevant 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 2689 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 2689 is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 2689? 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.