GWA Group Limited (ASX:GWA): What We Can Expect From This Growth Stock

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In December 2018, GWA Group Limited (ASX:GWA) announced its earnings update. Overall, the consensus outlook from analysts appear fairly confident, with earnings expected to grow by 31% in the upcoming year against the past 5-year average growth rate of 20%. Presently, with latest-twelve-month earnings at AU$50m, we should see this growing to AU$66m by 2020. Below is a brief commentary on the longer term outlook the market has for GWA Group. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for GWA Group

How is GWA Group going to perform in the near future?

The longer term view from the 7 analysts covering GWA is one of negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for GWA, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

ASX:GWA Past and Future Earnings, June 26th 2019
ASX:GWA Past and Future Earnings, June 26th 2019

This results in an annual growth rate of -7.8% based on the most recent earnings level of AU$50m to the final forecast of AU$59m by 2022. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of A$0.23 in the final year of forecast compared to the current A$0.19 EPS today. Fall in earnings appears to be a result of cost growth exceeding top-line growth of 8.0% in the next three years. Furthermore, the current 14% margin is expected to contract to 12% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For GWA Group, there are three fundamental aspects 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 GWA Group 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 GWA Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GWA Group? 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.