Genworth Mortgage Insurance Australia Limited (ASX:GMA): Will The Growth Last?

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The latest earnings release Genworth Mortgage Insurance Australia Limited’s (ASX:GMA) announced in December 2018 confirmed that the company experienced a immense headwind with earnings declining by -49%. Today I want to provide a brief commentary on how market analysts perceive Genworth Mortgage Insurance Australia’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

View our latest analysis for Genworth Mortgage Insurance Australia

Analysts’ expectations for this coming year seems positive, with earnings rising by a robust 22%. This growth seems to continue into the following year with rates arriving at double digit 41% compared to today’s earnings, and finally hitting AU$115m by 2022.

ASX:GMA Future Profit February 9th 19
ASX:GMA Future Profit February 9th 19

Although it is useful to be aware of the growth rate year by year relative to today’s level, it may be more valuable evaluating the rate at which the company is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Genworth Mortgage Insurance Australia’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 14%. This means, we can anticipate Genworth Mortgage Insurance Australia will grow its earnings by 14% every year for the next couple of years.

Next Steps:

For Genworth Mortgage Insurance Australia, I’ve put together three key aspects you should look at:

  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 GMA 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 GMA is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GMA? 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 editorial-team@simplywallst.com.