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On 30 April 2019, Metcash Limited (ASX:MTS) released its earnings update. Generally, analyst consensus outlook appear cautiously subdued, as a 2.5% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 4.7%. With trailing-twelve-month net income at current levels of AU$193m, we should see this rise to AU$198m in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The 10 analysts covering MTS view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, MTS’s earnings should reach AU$210m, from current levels of AU$193m, resulting in an annual growth rate of 3.7%. EPS reaches A$0.23 in the final year of forecast compared to the current A$0.21 EPS today. Margins are currently sitting at 1.5%, which is expected to expand to 1.6% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Metcash, I’ve put together three pertinent aspects you should look at:
- 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 Metcash 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 Metcash is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Metcash? 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 firstname.lastname@example.org. 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.