In August 2019, Mitchell Services Limited (ASX:MSV) announced its latest earnings update, which showed that the company finally turned profitable after delivering negative earnings on average over the last few years. Below, I’ve laid out key growth figures on how market analysts view Mitchell Services’s earnings growth trajectory over the next couple of years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for next year seems pessimistic, with earnings falling by a double-digit -12%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to AU$18m in 2022.
Although it’s informative knowing the rate of growth each year relative to today’s level, it may be more beneficial gauging the rate at which the business is growing every year, on average. The advantage of this method is that we can get a better picture of the direction of Mitchell Services’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 3.1%. This means, we can presume Mitchell Services will grow its earnings by 3.1% every year for the next couple of years.
For Mitchell Services, I’ve compiled three essential factors you should look at:
- 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.
- Valuation: What is MSV 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 MSV is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MSV? 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 firstname.lastname@example.org. 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.