Central China Real Estate Limited (HKG:832): Is It A Good Long Term Opportunity?

Simply Wall St

The latest earnings release Central China Real Estate Limited's (HKG:832) announced in December 2018 signalled that the business benefited from a robust tailwind, eventuating to a double-digit earnings growth of 42%. Below, I've laid out key numbers on how market analysts view Central China Real Estate's earnings growth trajectory over the next few 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.

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Check out our latest analysis for Central China Real Estate

Analysts' expectations for this coming year seems rather subdued, with earnings expanding by a single digit 7.3%. The growth outlook in the following year seems much more optimistic with rates reaching double digit 64% compared to today’s earnings and decreases to CN¥1.8b by 2022.

SEHK:832 Past and Future Earnings, May 16th 2019

Even though it is helpful to be aware of the rate of growth year by year relative to today’s figure, it may be more beneficial to gauge the rate at which the earnings are moving on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Central China Real Estate's earnings trajectory over time, be more volatile. To calculate 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 19%. This means, we can expect Central China Real Estate will grow its earnings by 19% every year for the next few years.

Next Steps:

For Central China Real Estate, I've compiled three fundamental aspects 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 832 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 832 is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 832? 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.