Based on Qudian Inc’s (NYSE:QD) earnings update in June 2018, the consensus outlook from analysts appear fairly confident, with profits predicted to increase by 25% next year, though this is relatively lower than the previous 5-year average earnings growth of 69%. Currently with trailing-twelve-month earnings of CN¥2.2b, we can expect this to reach CN¥2.7b by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Can we expect Qudian to keep growing?
Longer term expectations from the 8 analysts covering QD’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around 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.
By 2021, QD’s earnings should reach CN¥3.5b, from current levels of CN¥2.2b, resulting in an annual growth rate of 13%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of CN¥12.03 in the final year of forecast compared to the current CN¥17.13 EPS today. The bottom-line growth seems to be caused by reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. However, the expansion of the current 45% margin is not expected to be sustained, as it begins to contract to 30% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Qudian, I’ve put together three relevant 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 Qudian 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 Qudian is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Qudian? 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 email@example.com.