What Should We Expect From Smartgroup Corporation Ltd's (ASX:SIQ) Earnings Over The Next Few Years?
The latest earnings update Smartgroup Corporation Ltd (ASX:SIQ) released in December 2018 revealed that the business benefited from a robust tailwind, eventuating to a double-digit earnings growth of 44%. Today I want to provide a brief commentary on how market analysts predict Smartgroup's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
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View our latest analysis for Smartgroup
Analysts' outlook for this coming year seems optimistic, with earnings increasing by a robust 16%. This growth seems to continue into the following year with rates arriving at double digit 30% compared to today’s earnings, and finally hitting AU$88m by 2022.
Even though it is useful to understand the growth rate year by year relative to today’s value, it may be more insightful to evaluate the rate at which the business is rising or falling on average every year. The pro of this approach is that we can get a better picture of the direction of Smartgroup'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 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 13%. This means, we can expect Smartgroup will grow its earnings by 13% every year for the next few years.
Next Steps:
For Smartgroup, I've compiled three key aspects you should further examine:
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 SIQ 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 SIQ is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SIQ? 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 editorial-team@simplywallst.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.
