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What Do Investors Need To Know About The Future Of SJM Holdings Limited's (HKG:880)?

Since SJM Holdings Limited (HKG:880) released its earnings in December 2018, analyst consensus outlook appear bearish, with earnings expected to decline by 13% in the upcoming year. Though this is still an improvement on its past 5-year earnings growth rate of -31%, on average. Currently with a trailing-twelve-month profit of HK$2.9b, the consensus growth rate suggests that earnings will drop to HK$2.5b by 2020. Below is a brief commentary around SJM Holdings'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.

View our latest analysis for SJM Holdings

How will SJM Holdings perform in the near future?

The view from 19 analysts over the next three years is one of 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.

SEHK:880 Past and Future Earnings, July 25th 2019
SEHK:880 Past and Future Earnings, July 25th 2019

This results in an annual growth rate of 6.1% based on the most recent earnings level of HK$2.9b to the final forecast of HK$3.3b by 2022. EPS reaches HK$0.62 in the final year of forecast compared to the current HK$0.50 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 8.3% to 6.6% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For SJM Holdings, I've compiled three pertinent factors you should further examine:

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  1. 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.

  2. Valuation: What is SJM Holdings 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 SJM Holdings is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SJM Holdings? 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 editorial-team@simplywallst.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.