Costa Group Holdings Limited’s (ASX:CGC) released its most recent earnings update in July 2018, which confirmed that the company experienced a strong tailwind, eventuating to a high double-digit earnings growth of 100%. Today I want to provide a brief commentary on how market analysts perceive Costa Group Holdings’s earnings growth outlook over the next couple of 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.

See our latest analysis for Costa Group Holdings

Analysts’ outlook for the upcoming year seems pessimistic, with earnings falling by a double-digit -23%. Beyond this, earnings are predicted to continue to be below today’s level, with a decline of -13% in 2020, eventually reaching AU$100m in 2021.

Even though it is helpful to be aware of the growth rate year by year relative to today’s value, it may be more insightful evaluating the rate at which the business is moving every year, on average. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of Costa Group Holdings’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -0.4%. This means, we can presume Costa Group Holdings will chip away at a rate of -0.4% every year for the next few years.

Next Steps:

For Costa Group Holdings, I’ve compiled three fundamental factors you should further examine:

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 CGC 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 CGC is currently mispriced by the market.

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