What Should You Know About MTR Corporation Limited's (HKG:66) Growth?
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Based on MTR Corporation Limited's (HKG:66) earnings update in December 2018, analyst forecasts seem bearish, as a 19% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 1.7%. With trailing-twelve-month net income at current levels of HK$16b, the consensus growth rate suggests that earnings will decline to HK$13b by 2020. Below is a brief commentary on the longer term outlook the market has for MTR. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Check out our latest analysis for MTR
Can we expect MTR to keep growing?
The longer term view from the 9 analysts covering 66 is one of negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of 66's earnings growth over these next few years.
From the current net income level of HK$16b and the final forecast of HK$15b by 2022, the annual rate of growth for 66’s earnings is -1.2%. This leads to an EPS of HK$2.48 in the final year of projections relative to the current EPS of HK$2.64. The primary reason for earnings contraction is due to cost outpacing top line growth of 3.9% over the next few years. With this high cost growth, margins is expected to contract from 30% to 25% by the end of 2022.
Next Steps:
Future outlook is only one aspect when you're building an investment case for a stock. For MTR, I've compiled three key aspects you should further research:
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.
Valuation: What is MTR 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 MTR is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of MTR? 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.
