Will SRC Energy Inc.’s (NYSEMKT:SRCI) Earnings Grow In Next 12 Months?

In March 2019, SRC Energy Inc. (NYSEMKT:SRCI) released its earnings update. Generally, analyst consensus outlook appear pessimistic, with profits predicted to drop by 3.9% next year relative to the past 5-year average growth rate of 35%. Currently with a trailing-twelve-month profit of US$260m, the consensus growth rate suggests that earnings will drop to US$250m by 2020. Below is a brief commentary around SRC Energy’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for SRC Energy

Exciting times ahead?

The longer term expectations from the 15 analysts of SRCI is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of SRCI’s earnings growth over these next few years.

AMEX:SRCI Past and Future Earnings, July 23rd 2019
AMEX:SRCI Past and Future Earnings, July 23rd 2019

From the current net income level of US$260m and the final forecast of US$312m by 2022, the annual rate of growth for SRCI’s earnings is 8.4%. This leads to an EPS of $1.18 in the final year of projections relative to the current EPS of $1.07. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 40% to 38% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For SRC Energy, I’ve compiled three pertinent factors 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 SRC Energy 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 SRC Energy is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SRC Energy? 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.