In This Article:
In June 2018, NZX Limited (NZSE:NZX) released its earnings update. Generally, analysts seem fairly confident, with profits predicted to increase by 5.5% next year against the past 5-year average growth rate of -0.9%. With trailing-twelve-month net income at current levels of NZ$14m, we should see this rise to NZ$15m in 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for NZX in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
See our latest analysis for NZX
Can we expect NZX to keep growing?
The longer term view from the 3 analysts covering NZX is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. 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.
By 2021, NZX’s earnings should reach NZ$19m, from current levels of NZ$15m, resulting in an annual growth rate of 9.3%. This leads to an EPS of NZ$0.066 in the final year of projections relative to the current EPS of NZ$0.055. Growth in earnings appears to be a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. With a current profit margin of 20%, this movement will result in a margin of 25% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For NZX, 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 NZX 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 NZX 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 NZX? 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.