The most recent earnings update GTN Limited’s (ASX:GTN) released in June 2018 confirmed that the company faced a immense headwind with earnings declining by -12%. Investors may find it useful to understand how market analysts perceive GTN’s earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
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Market analysts’ prospects for this coming year seems pessimistic, with earnings declining by -2.4%. But in the following year, there is a complete contrast in performance, with reaching double digit 18% compared to today’s level and continues to increase to AU$34m in 2022.
Although it’s helpful to be aware of the growth each year relative to today’s level, it may be more valuable determining the rate at which the company is moving every year, on average. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of GTN’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 that, we can anticipate GTN will grow its earnings by 14% every year for the next couple of years.
For GTN, there are three important factors 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 GTN 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 GTN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GTN? 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 firstname.lastname@example.org.