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In March 2019, GAIL (India) Limited (NSE:GAIL) announced its latest earnings update, which indicated that the company experienced a robust tailwind, eventuating to a double-digit earnings growth of 37%. Below is my commentary, albeit very simple and high-level, on how market analysts view GAIL (India)'s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' expectations for this coming year seems rather muted, with earnings climbing by a single digit 1.7%. The following year doesn't look much more exciting, though earnings does reach ₹82b in 2022.
While it is helpful to be aware of the growth each year relative to today’s value, it may be more insightful to evaluate the rate at which the business is moving on average every year. The pro of this method is that we can get a bigger picture of the direction of GAIL (India)'s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. 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 4.7%. This means, we can anticipate GAIL (India) will grow its earnings by 4.7% every year for the next couple of years.
For GAIL (India), I've put together 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 GAIL 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 is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GAIL? 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.