Red Hat Inc (NYSE:RHT) is predicted to grow its earnings per share by a robust double-digit 26.95% over the next 12 months. At a current EPS of $1.49, this growth rate means shareholders can expect an impending EPS of around $1.89. A positive earnings growth may please investors on the surface, but it’s important to compare this expectation to RHT’s track record. This will give investors context as to whether the growth prospect is justified and bolstered by past trends. I am going to look at the latest data on RHT to assess whether this expected growth is reasonable. Check out our latest analysis for Red Hat
How is RHT going to perform in the future?
Analysts are expecting earnings to increase anywhere from $1.49 to $2.81 in over a year. This indicates a relatively solid consensus earnings per share growth rate of 27% over the next 1-2 years, which is an optimistic outlook in the near term. In the same period we will see the revenue grow from $2.52 Billion to $3.59 Billion in 2020 and net income is predicted to grow from $265 Million to $665 Million in 2020, roughly growing 2.5x. Future margins are predicted to be a respectable 18.52%.
Is this similar growth to the past?
The past can be an insightful indicator for future performance for a stock. We can determine whether this level of expected growth is excessive or whether the company continues to go from strength to strength. RHT’s earnings growth last year was 27.63% which indicates that the company’s past performance is supportive of a strong continuation. This means RHT has already proven its capacity to grow at a robust rate, which should give investors higher conviction of analysts’ consensus prediction for the company’s future growth moving forward.
On the whole, RHT looks like it is well-placed to deliver solid growth in the upcoming year, supported by analysts’ double-digit growth projections. However, in order to determine whether this bullish sentiment is yet to be accounted for by the market, we also need to see if it is undervalued. 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 RHT an undervalued gem? Let’s find out in this free analysis report. If you are not interested in RHT anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.