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AU Small Finance Bank Limited’s (NSE:AUBANK) latest earnings announcement in March 2019 showed that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 31%. Below, I’ve laid out key growth figures on how market analysts perceive AU Small Finance Bank’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for next year seems optimistic, with earnings increasing by a robust 44%. This growth seems to continue into the following year with rates reaching double digit 99% compared to today’s earnings, and finally hitting ₹10b by 2022.
Even though it is helpful to be aware of the growth year by year relative to today’s value, it may be more insightful to analyze the rate at which the business is rising or falling every year, on average. The advantage of this approach is that we can get a better picture of the direction of AU Small Finance Bank’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’ve inserted 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 28%. This means that, we can assume AU Small Finance Bank will grow its earnings by 28% every year for the next few years.
For AU Small Finance Bank, I’ve compiled three essential factors you should look at:
- 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 AUBANK 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 AUBANK is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AUBANK? 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.