GWA Group Limited’s (ASX:GWA) most recent earnings update in June 2017 confirmed that the business gained from a slight tailwind, leading to a single-digit earnings growth of 3.37%. Today I want to provide a brief commentary on how market analysts predict GWA Group’s earnings growth trajectory over the next couple of 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. See our latest analysis for GWA Group
Market analysts’ prospects for the upcoming year seems pessimistic, with earnings decreasing by -3.16%. Over the medium term, earnings are predicted to continue to be below today’s level, with a decrease of -5.09% in 2020, eventually reaching A$50.9M in 2021.
While it is helpful to be aware of the rate of growth year by year relative to today’s figure, it may be more beneficial evaluating the rate at which the company is rising or falling every year, on average. The pro of this method is that we can get a better picture of the direction of GWA Group’s earnings trajectory over the long run, irrespective of near term fluctuations, 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 -1.41%. This means that, we can presume GWA Group will chip away at a rate of -1.41% every year for the next couple of years.
Next Steps:
For GWA Group, there are three pertinent aspects you should look at:
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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.
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2. Valuation: What is GWA 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 GWA is currently mispriced by the market.
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3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GWA? 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.