Hotel Property Investments Limited (ASX:HPI)’s earnings are predicted to shrink by a high double-digit rate of -68.98% over the next three years. At a current EPS of $0.68, this adverse movement means shareholders can expect an impending EPS of $0.21. A negative earnings growth may indicate change in HPI, whether the company is undergoing an investment period in which expenses grow at a faster rate than revenue, or the industry is facing negative headwinds moving forward. To assess the reasonability of HPI’s earnings per share contraction, we should look at its most recent growth rate delivered. Check out our latest analysis for Hotel Property Investments
Adverse times ahead
Investors in Hotel Property Investments are potentially in for a tough ride over the next couple of years. Earnings are predicted to drop rapidly from the last update on 30 June 2017 over the next couple of years. According to analyst coverage of the stock, that would be a drop of -69%. This doesn’t sound very promising to me. During the same time we will see the revenue grow from $48 Million to $50 Million in 2021 and net income is predicted to plummet from $98 Million to $32 Million in 2021. Given this future level of revenue and earnings, margins are expected to be extremely healthy.
Is this similar growth to the past?
The past can be a great indicator for future performance for a stock. We can determine whether this level of expected growth is too pessimistic or whether the company has consistently shown a negative trend. HPI is expected to face a significant change from a previous double-digit growth of 19.01%, over the last five years, to a forecast double-digit decline by analysts. This is highly pessimistic and may be a sign of an investment period for HPI, incurring higher expense growth than revenue.
On the whole, HPI looks like it faces some headwinds in the upcoming year, exhibited by analysts’ negative growth projections. However, this negative sentiment provides an opportunity for contrarian, long term investors to see if the stock has been over-penalized by the market. If HPI is well-below its intrinsic value, no matter how bad the near term outlook, the stock could return a good investment. Is HPI an undervalued gem? Let’s find out in this free analysis report. If you are not interested in HPI anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.
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