Atul Auto Limited’s (NSE:ATULAUTO) most recent earnings update in March 2018 confirmed that the company experienced a strong tailwind, leading to a double-digit earnings growth of 30%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Atul Auto’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

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Analysts’ outlook for the coming year seems rather muted, with earnings increasing by a single digit 9.9%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 23% compared to today’s earnings and decreases to ₹500m by 2022.

While it’s informative understanding the rate of growth each year relative to today’s value, it may be more valuable to gauge the rate at which the earnings are rising or falling every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Atul Auto’s earnings trajectory over time, fluctuate up and down. To compute this rate, I’ve inserted 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 7.5%. This means that, we can anticipate Atul Auto will grow its earnings by 7.5% every year for the next couple of years.

Next Steps:

For Atul Auto, I’ve put together 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 ATULAUTO 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 ATULAUTO is currently mispriced by the market.

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