On 30 June 2019, McPherson's Limited (ASX:MCP) released its earnings update. Generally, analysts seem cautiously bearish, with earnings expected to grow by 5.5% in the upcoming year against the higher past 5-year average growth rate of 48%. Currently with trailing-twelve-month earnings of AU$14m, we can expect this to reach AU$14m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for McPherson's in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
Over the next three years, it seems the consensus view of the 4 analysts covering MCP 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. 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 MCP's earnings growth over these next few years.
From the current net income level of AU$14m and the final forecast of AU$18m by 2022, the annual rate of growth for MCP’s earnings is 10.0%. This leads to an EPS of A$0.18 in the final year of projections relative to the current EPS of A$0.13. Margins are currently sitting at 6.5%, which is expected to expand to 7.9% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For McPherson's, I've compiled three important 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 McPherson's 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 McPherson's is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of McPherson's? 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.