The latest earnings announcement Texhong Textile Group Limited (HKG:2678) released in December 2018 signalled that the company gained from a slight tailwind, leading to a single-digit earnings growth of 1.0%. Today I want to provide a brief commentary on how market analysts predict Texhong Textile Group's earnings growth outlook 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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Market analysts' consensus outlook for the upcoming year seems optimistic, with earnings climbing by a robust 25%. This growth seems to continue into the following year with rates reaching double digit 49% compared to today’s earnings, and finally hitting CN¥2.0b by 2022.
While it is helpful to be aware of the growth each year relative to today’s level, it may be more valuable to gauge the rate at which the company is moving on average every year. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Texhong Textile Group's earnings trajectory over time, which may be more relevant for long term investors. To calculate 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 18%. This means that, we can assume Texhong Textile Group will grow its earnings by 18% every year for the next couple of years.
For Texhong Textile Group, there are three relevant 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 2678 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 2678 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of 2678? 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 firstname.lastname@example.org. 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.