In June 2018, GR Engineering Services Limited (ASX:GNG) announced its most recent earnings update, which indicated that the company experienced a minor headwind with earnings declining from AU$13m to AU$12m, a change of -9.5%. Investors may find it useful to understand how market analysts perceive GR Engineering Services’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for GR Engineering Services

Market analysts’ prospects for the upcoming year seems pessimistic, with earnings declining by -7.7%. But in the following year, there is a complete contrast in performance, with earnings growth rates arriving at double digit 45% compared to today’s level before plateauing to AU$17m in 2021.

While it’s informative understanding the rate of growth year by year relative to today’s level, it may be more valuable estimating the rate at which the company is rising or falling on average every year. The pro of this technique is that we can get a bigger picture of the direction of GR Engineering Services’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 18%. This means that, we can expect GR Engineering Services will grow its earnings by 18% every year for the next couple of years.

Next Steps:

For GR Engineering Services, there are three essential aspects you should further examine:

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 GNG 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 GNG is currently mispriced by the market.

3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GNG? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.