How Analysts See Green Dot Corporation (GDOT) Perform Over The Next Year?

Analysts covering Green Dot Corporation (NYSE:GDOT) are predicting the earnings to grow 20.4% in years’ time. What are the important facts you need to know? In this article we will look at the latest data and analyse the future performance of this growth stock in more detail. Check out our latest analysis for Green Dot

Exciting times ahead for GDOT

Investors in Green Dot have been patiently waiting for the uptick in earnings and if you believe the 8 analysts covering the stock then the next 3 years will be very interesting. We should see 56.4% growth and estimates for earnings per share range from $1.39 to $1.67.

Green Dot (NYSE:GDOT) Past Future Earnings May 18th 17
Green Dot (NYSE:GDOT) Past Future Earnings May 18th 17
This will project the annual earnings to levels above what has been seen in the past few years.

In the same period we will see the revenue grow from $743 Million to $947 Million in 2019 and profit is predicted to grow from $49 Million to $124 Million in 2019, roughly growing 2.5x. Margins are predicted to be a respectable 13.1% during this time as well.

Basis for the growth

Green Dot has outperformed the Financial Institutions industry over the past year.

Whilst GDOT’s Return on Equity of 7.2% isn’t horrific, it means that the company has underperformed the Financial Institutions industry average of 12.47%. This is expected to slightly improve with analysts expecting ROE in 3 years to be 10.3%.

Green Dot (NYSE:GDOT) Future Perf May 18th 17
Green Dot (NYSE:GDOT) Future Perf May 18th 17

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.

Final words

Green Dot 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 GDOT 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 GDOT anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.