The Star Entertainment Group Limited (ASX:SGR): Is It A Smart Long Term Opportunity?

As The Star Entertainment Group Limited (ASX:SGR) announced its earnings release on 30 June 2019, analyst consensus outlook appear cautiously optimistic, as a 20% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of 8.9%. Currently with trailing-twelve-month earnings of AU$198m, we can expect this to reach AU$237m by 2020. Below is a brief commentary around Star Entertainment Group’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Star Entertainment Group

Exciting times ahead?

The longer term expectations from the 10 analysts of SGR is tilted towards the 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.

ASX:SGR Past and Future Earnings, August 16th 2019
ASX:SGR Past and Future Earnings, August 16th 2019

This results in an annual growth rate of 6.8% based on the most recent earnings level of AU$198m to the final forecast of AU$207m by 2022. This leads to an EPS of A$0.23 in the final year of projections relative to the current EPS of A$0.22. However, the expansion of the current 9.1% margin is not expected to be sustained, as it begins to contract to 8.5% by the end of 2022.

Next Steps:

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

  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 Star Entertainment Group 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 Star Entertainment Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Star Entertainment Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.