Based on Reckon Limited’s (ASX:RKN) earnings update in December 2018, analyst consensus outlook appear cautiously optimistic, with earnings expected to grow by 14% in the upcoming year compared with the past 5-year average growth rate of -29%. With trailing-twelve-month net income at current levels of AU$7.7m, we should see this rise to AU$8.8m in 2020. Below is a brief commentary around Reckon’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
The 2 analysts covering RKN view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To understand the overall trajectory of RKN’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 5.7% based on the most recent earnings level of AU$7.7m to the final forecast of AU$9.2m by 2022. This leads to an EPS of A$0.080 in the final year of projections relative to the current EPS of A$0.068. Margins are currently sitting at 10%, which is expected to expand to 12% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Reckon, I’ve put together three relevant factors you should further examine:
- 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 Reckon 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 Reckon is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Reckon? 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.