Based on Midway Limited’s (ASX:MWY) earnings update in June 2018, analyst consensus outlook appear cautiously subdued, with earnings expected to grow by 3.9% in the upcoming year compared with the higher past 5-year average growth rate of 21%. With trailing-twelve-month net income at current levels of AU$18m, we should see this rise to AU$19m in 2019. Below is a brief commentary on the longer term outlook the market has for Midway. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Midway

How will Midway perform in the near future?

Over the next three years, it seems the consensus view of the 4 analysts covering MWY is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. 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 MWY’s earnings growth over these next few years.

By 2021, MWY’s earnings should reach AU$25m, from current levels of AU$18m, resulting in an annual growth rate of 9.1%. This leads to an EPS of A$0.30 in the final year of projections relative to the current EPS of A$0.25. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 7.8%, which is expected to expand to 8.0% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Midway, there are three essential aspects you should further research:

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 Midway 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 Midway is currently mispriced by the market.

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