GUD Holdings Limited’s (ASX:GUD) released its most recent earnings update in June 2018, which showed that the business gained from a robust tailwind, leading to a double-digit earnings growth of 11%. Below is a brief commentary on my key takeaways on how market analysts view GUD Holdings’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
View our latest analysis for GUD Holdings
Analysts’ expectations for this coming year seems optimistic, with earnings climbing by a robust 26%. This growth seems to continue into the following year with rates arriving at double digit 36% compared to today’s earnings, and finally hitting AU$74m by 2021.
Even though it’s informative knowing the growth rate year by year relative to today’s level, it may be more valuable determining the rate at which the business is growing on average every year. The benefit of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of GUD Holdings’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 12%. This means, we can presume GUD Holdings will grow its earnings by 12% every year for the next couple of years.
Next Steps:
For GUD Holdings, I’ve put together three key aspects 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 GUD 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 GUD is currently mispriced by the market.
-
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GUD? 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.