The most recent earnings update Over the Wire Holdings Limited’s (ASX:OTW) released in June 2018 indicated that the company benefited from a strong tailwind, leading to a high double-digit earnings growth of 53.7%. Today I want to provide a brief commentary on how market analysts view Over the Wire Holdings’s earnings growth trajectory 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.
Check out our latest analysis for Over the Wire Holdings
Analysts’ outlook for next year seems positive, with earnings rising by a robust 26.0%. This growth seems to continue into the following year with rates reaching double digit 59.0% compared to today’s earnings, and finally hitting AU$10.9m by 2021.
While it’s helpful to be aware of the growth rate year by year relative to today’s level, it may be more valuable gauging the rate at which the business is moving on average every year. The pro of this technique is that we can get a better picture of the direction of Over the Wire Holdings’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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 22.4%. This means that, we can expect Over the Wire Holdings will grow its earnings by 22.4% every year for the next few years.
Next Steps:
For Over the Wire Holdings, I’ve put together three relevant factors you should look at:
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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.
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Valuation: What is OTW 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 OTW is currently mispriced by the market.
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Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OTW? 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.