The most recent earnings update Power Finance Corporation Limited’s (NSE:PFC) released in March 2018 suggested that the company gained from a significant tailwind, more than doubling its earnings from the prior year. Below, I’ve laid out key numbers on how market analysts perceive Power Finance’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Power Finance

Market analysts’ consensus outlook for next year seems pessimistic, with earnings falling by a double-digit -12%. However, the next few years seem to illustrate a completely different picture, with expected earnings growth rates arriving at double digit 12% compared to today’s level and continues to increase.

While it’s informative knowing the growth year by year relative to today’s level, it may be more insightful to estimate the rate at which the business is growing every year, on average. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Power Finance’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 6.6%. This means, we can expect Power Finance will grow its earnings by 6.6% every year for the next few years.

Next Steps:

For Power Finance, there are three important factors you should look at:

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 PFC 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 PFC is currently mispriced by the market.

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