What are analysts saying about Northern Star Resources Limited’s (ASX:NST) future?

Northern Star Resources Limited (ASX:NST)’s business is predicted to grow 30.1% during the next year. Are you considering investing? Then keep reading. I’m going to investigate the latest data and look into some metrics you shouldn’t overlook. Check out our latest analysis for Northern Star Resources

How is Northern Star Resources going to perform in the future?

Investors in Northern Star Resources have been patiently waiting for the uptick in earnings and if you believe the 7 analysts covering the stock then the next 3 years will be very interesting. The estimates for earnings per share range from $0.46 to $0.73 with an average expectation of 94.7% growth.

ASX-NST-past-future-earnings-Mon-Jan-16-2017

Revenue during the same period is expected to grow from $785 Million to $1,006 Million in 2020 and profits (net income) are predicted to grow from $151 M to $304 M in 2020, roughly growing 2x. Margins are expected to be extremely healthy during this time as well.

Basis for the growth

Northern Star Resources has outperformed the average growth in earnings of the Materials industry over the past year.

NST has been performing exceptionally based on an ROE of 42.7%, this is above the average for the industry of 12.58%. Investors can also expect the performance to continue around this level with the estimated ROE in 3 years staying at 32.6%. ASX-NST-future-perf-Mon-Jan-16-2017

Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.

Conclusion

Northern Star Resources is a fast growing company, but as Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price“. Is NST overpriced? Or could it be considered an undervalued opportunity? I recommend you see our latest FREE analysis to find out!

If you are not interested in NST anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.