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On 31 August 2018, boohoo group plc (LON:BOO) released its earnings update. Generally, analysts seem fairly confident, with profits predicted to increase by 31.6% next year, though this is comparatively lower than the previous 5-year average earnings growth of 35.9%. By 2019, we can expect boohoo group’s bottom line to reach UK£44.5m, a jump from the current trailing-twelve-month UK£33.8m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for boohoo group in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.
View our latest analysis for boohoo group
Can we expect boohoo group to keep growing?
The view from 11 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of 16.7% based on the most recent earnings level of UK£31.7m to the final forecast of UK£51.0m by 2021. This leads to an EPS of £0.044 in the final year of projections relative to the current EPS of £0.028. Growth in the bottom line seems to suggest a high top-line growth of 22.7% falling down into the bottom line. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 5.5% to 4.4% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For boohoo group, I’ve compiled three important factors you should further examine:
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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 boohoo group 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 boohoo group 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 boohoo group? 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.