In March 2018, GAIL (India) Limited (NSE:GAIL) announced its earnings update. Overall, analysts seem cautiously optimistic, with profits predicted to increase by 19% next year compared with the past 5-year average growth rate of -2.6%. By 2019, we can expect GAIL (India)’s bottom line to reach ₹57.0b, a jump from the current trailing-twelve-month ₹47.9b. Below is a brief commentary around GAIL (India)’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 20 analysts of GAIL is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of ₹47.9b and the final forecast of ₹68.4b by 2021, the annual rate of growth for GAIL’s earnings is 12%. EPS reaches ₹31.1 in the final year of forecast compared to the current ₹21.26 EPS today. The main reason for growth is a result of a high top-line growth of 12% falling down into the bottom line. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 8.8% to 8.4% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For GAIL (India), there are three fundamental aspects you should further examine:
- 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 GAIL (India) 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 GAIL (India) is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GAIL (India)? 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 firstname.lastname@example.org.