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After GAIL (India) Limited's (NSE:GAIL) recent earnings announcement in March 2019, analyst consensus outlook seem pessimistic, with earnings expected to decline by 3.4% in the upcoming year against the past 5-year average growth rate of 11%. With trailing-twelve-month net income at current levels of ₹65b, the consensus growth rate suggests that earnings will decline to ₹63b by 2020. 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. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 21 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. 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 GAIL's earnings growth over these next few years.
This results in an annual growth rate of 2.1% based on the most recent earnings level of ₹65b to the final forecast of ₹68b by 2022. EPS reaches ₹29.2 in the final year of forecast compared to the current ₹29.03 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 8.6% to 8.2% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For GAIL (India), I've compiled three essential 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!
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 email@example.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.