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In May 2018, Oceania Healthcare Limited (NZSE:OCA) announced its latest earnings update, which signalled that the company experienced a sizeable tailwind, eventuating to a high double-digit earnings growth of 71.5%. Investors may find it useful to understand how market analysts perceive Oceania Healthcare’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.
Check out our latest analysis for Oceania Healthcare
Market analysts’ consensus outlook for next year seems pessimistic, with earnings decreasing by a double-digit -26.3%. Over the medium term, earnings will begin to improve, climbing year on year, and generating NZ$79.7m by 2021.
While it’s helpful to understand the rate of growth year by year relative to today’s value, it may be more valuable evaluating the rate at which the company is moving on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Oceania Healthcare’s earnings trajectory over time, which may be more relevant for long term investors. 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 9.0%. This means that, we can presume Oceania Healthcare will grow its earnings by 9.0% every year for the next few years.
Next Steps:
For Oceania Healthcare, there are three key 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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Future Earnings: How does OCA’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
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Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OCA? 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.