The latest earnings release 58.com Inc.'s (NYSE:WUBA) announced in December 2018 showed that the company gained from a sizeable tailwind, eventuating to a high double-digit earnings growth of 55%. Below is a brief commentary on my key takeaways on how market analysts perceive 58.com'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.
Analysts' outlook for this coming year seems optimistic, with earnings rising by a robust 19%. This growth seems to continue into the following year with rates reaching double digit 50% compared to today’s earnings, and finally hitting CN¥3.8b by 2022.
While it’s helpful to be aware of the growth rate each year relative to today’s level, it may be more insightful to analyze the rate at which the company is rising or falling every year, on average. The benefit of this approach is that we can get a better picture of the direction of 58.com's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put 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 19%. This means, we can expect 58.com will grow its earnings by 19% every year for the next few years.
For 58.com, I've compiled three important 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 WUBA 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 WUBA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of WUBA? 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.