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After Pacific Smiles Group Limited’s (ASX:PSQ) earnings announcement in June 2018, analysts seem extremely confident, with profits predicted to ramp up by an impressive 53% next year, compared with the previous 5-year average growth rate of 3.0%. By 2019, we can expect Pacific Smiles Group’s bottom line to reach AU$10m, a jump from the current trailing-twelve-month AU$7m. Below is a brief commentary on the longer term outlook the market has for Pacific Smiles Group. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Check out our latest analysis for Pacific Smiles Group
Exciting times ahead?
The 3 analysts covering PSQ view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of PSQ’s earnings growth over these next few years.
This results in an annual growth rate of 18% based on the most recent earnings level of AU$7m to the final forecast of AU$12m by 2021. This leads to an EPS of A$0.078 in the final year of projections relative to the current EPS of A$0.043. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, PSQ’s profit margin will have expanded from 6.3% to 8.4%.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Pacific Smiles Group, there are three fundamental 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 Pacific Smiles 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 Pacific Smiles 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 Pacific Smiles 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.