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In September 2018, CSR Limited (ASX:CSR) announced its earnings update. Overall, analysts seem extremely confident, with profits predicted to ramp up by an impressive 56% next year, relative to the historical 5-year average growth rate of 23%. By 2020, we can expect CSR’s bottom line to reach AU$294m, a jump from the current trailing-twelve-month of AU$189m. Below is a brief commentary on the longer term outlook the market has for CSR. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The longer term view from the 12 analysts covering CSR 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 CSR, 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.
By 2022, CSR’s earnings should reach AU$279m, from current levels of AU$189m, resulting in an annual growth rate of -0.5%. EPS reaches A$0.29 in the final year of forecast compared to the current A$0.38 EPS today. The bottom-line decline seems to be caused by a falling top-line, with negative growth of -4.3%. However, the current margin of 7.2% is expected to expand to 12% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For CSR, I’ve put together three pertinent aspects you should further examine:
- 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 CSR 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 CSR is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CSR? 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.