Based on Oil and Natural Gas Corporation Limited’s (NSE:ONGC) earnings update in March 2018, it seems that analyst forecasts are fairly optimistic, with earnings expected to grow by 40.90% in the upcoming year against the past 5-year average growth rate of -6.42%. With net income at current levels of ₹221.06b, we should see this rise to ₹311.48b in 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Oil and Natural Gas in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here. Check out our latest analysis for Oil and Natural Gas
Can we expect Oil and Natural Gas to keep growing?
The 12 analysts covering ONGC view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ONGC’s earnings growth over these next few years.
This results in an annual growth rate of 10.92% based on the most recent earnings level of ₹221.06b to the final forecast of ₹311.27b by 2021. EPS reaches ₹26.85 in the final year of forecast compared to the current ₹17.23 EPS today. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 6.10%, this movement will result in a margin of 7.96% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Oil and Natural Gas, I’ve put together three important 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 Oil and Natural Gas 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 Oil and Natural Gas is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Oil and Natural Gas? 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 pass 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.