The latest earnings release Auswide Bank Ltd’s (ASX:ABA) announced in June 2018 showed that the business gained from a strong tailwind, eventuating to a double-digit earnings growth of 13%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Auswide Bank’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for next year seems rather muted, with earnings expanding by a single digit 8.8%. The growth outlook in the following year seems much more positive with rates arriving at double digit 20% compared to today’s earnings, and finally hitting AU$23m by 2022.
Even though it’s informative understanding the growth each year relative to today’s figure, it may be more beneficial to evaluate the rate at which the company is rising or falling on average every year. The benefit of this technique is that we can get a bigger picture of the direction of Auswide Bank’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 9.6%. This means that, we can anticipate Auswide Bank will grow its earnings by 9.6% every year for the next couple of years.
For Auswide Bank, there are three pertinent factors you should further research:
- 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 ABA 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 ABA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ABA? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.