Northern Star Resources Limited (ASX:NST): Is It A Smart Long Term Opportunity?

Since Northern Star Resources Limited (ASX:NST) released its earnings in June 2018, it seems that analyst forecasts are substantially optimistic, as a 57% rise in profits is expected in the upcoming year, against the historical 5-year average growth rate of 42%. Currently with trailing-twelve-month earnings of AU$194m, we can expect this to reach AU$305m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Northern Star Resources

Exciting times ahead?

The longer term view from the 11 analysts covering NST is one of 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.

This results in an annual growth rate of 19% based on the most recent earnings level of AU$194m to the final forecast of AU$439m by 2022. This leads to an EPS of A$0.67 in the final year of projections relative to the current EPS of A$0.32. Margins are currently sitting at 20%, which is expected to expand to 25% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Northern Star Resources, I've put together three relevant 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 Northern Star Resources 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 Northern Star Resources is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Northern Star Resources? 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.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.