Genworth Mortgage Insurance Australia Limited (ASX:GMA): Immense Growth Potential?

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As Genworth Mortgage Insurance Australia Limited (ASX:GMA) announced its earnings release on 31 December 2018, analysts seem fairly confident, as a 22% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of -20%. Presently, with latest-twelve-month earnings at AU$76m, we should see this growing to AU$92m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Genworth Mortgage Insurance Australia in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Genworth Mortgage Insurance Australia

Exciting times ahead?

Over the next three years, it seems the consensus view of the 4 analysts covering GMA is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of GMA’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.

ASX:GMA Past and Future Earnings, February 21st 2019
ASX:GMA Past and Future Earnings, February 21st 2019

By 2022, GMA’s earnings should reach AU$115m, from current levels of AU$76m, resulting in an annual growth rate of 14%. This leads to an EPS of A$0.30 in the final year of projections relative to the current EPS of A$0.17. In 2022, GMA’s profit margin will have expanded from 21% to 25%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Genworth Mortgage Insurance Australia, I’ve compiled three fundamental aspects you should further research:

  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 Genworth Mortgage Insurance Australia 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 Genworth Mortgage Insurance Australia is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Genworth Mortgage Insurance Australia? 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.