In June 2018, Auswide Bank Ltd (ASX:ABA) released its earnings update. Generally, analyst consensus outlook appear cautiously subdued, with profits predicted to rise by 8.8% next year compared with the higher past 5-year average growth rate of 18%. Currently with trailing-twelve-month earnings of AU$17m, we can expect this to reach AU$19m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Auswide Bank in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Auswide Bank in the longer term?
The longer term expectations from the 2 analysts of ABA 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. To understand the overall trajectory of ABA’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.
From the current net income level of AU$17m and the final forecast of AU$23m by 2021, the annual rate of growth for ABA’s earnings is 9.6%. This leads to an EPS of A$0.54 in the final year of projections relative to the current EPS of A$0.41. The bottom-line growth seems to be caused by cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. In 2021, ABA’s profit margin will have expanded from 25% to 28%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Auswide Bank, I’ve compiled three fundamental aspects 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 Auswide Bank 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 Auswide Bank is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Auswide Bank? 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 email@example.com.