The most recent earnings update Ascott Residence Trust’s (SGX:A68U) released in December 2017 signalled that the business experienced a large tailwind, eventuating to a high double-digit earnings growth of 57.22%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Ascott Residence Trust’s earnings growth trajectory over the next few 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 Ascott Residence Trust

Analysts’ outlook for next year seems pessimistic, with earnings declining by a double-digit -35.36%. Over the medium term, earnings should continue to be below today’s level, with a decline of -31.05% in 2020, eventually reaching SGD134.5M in 2021.

Even though it is useful to be aware of the growth rate each year relative to today’s level, it may be more valuable to determine the rate at which the business is growing on average every year. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Ascott Residence Trust’s earnings trajectory over time, be more volatile. To calculate this rate, I put 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 -16.18%. This means, we can expect Ascott Residence Trust will chip away at a rate of -16.18% every year for the next few years.

Next Steps:

For Ascott Residence Trust, I’ve compiled three key aspects you should further research:

• 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 A68U 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 A68U is currently mispriced by the market.

• 3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of A68U? 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 pass 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.