In February 2019, ASOS Plc (LON:ASC) released its earnings update. Generally, analyst forecasts appear to be bearish, with profits predicted to drop by 6.5% next year relative to the past 5-year average growth rate of 17%. With trailing-twelve-month net income at current levels of UK£82m, the consensus growth rate suggests that earnings will decline to UK£77m by 2020. Below is a brief commentary on the longer term outlook the market has for ASOS. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
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What can we expect from ASOS in the longer term?
Over the next three years, it seems the consensus view of the 26 analysts covering ASC is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of ASC's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
From the current net income level of UK£82m and the final forecast of UK£172m by 2022, the annual rate of growth for ASC’s earnings is 29%. EPS reaches £1.3 in the final year of forecast compared to the current £0.99 EPS today. With a current profit margin of 3.4%, this movement will result in a margin of 4.5% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For ASOS, 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 ASOS 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 ASOS is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ASOS? 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.