In December 2018, Computershare Limited (ASX:CPU) announced its earnings update. Overall, analyst forecasts seem fairly subdued, as a 0.7% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 14%. By 2020, we can expect Computershare’s bottom line to reach US$302m, a jump from the current trailing-twelve-month of US$300m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Computershare in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Computershare in the longer term?
The longer term view from the 11 analysts covering CPU 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 CPU, 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.
This results in an annual growth rate of -0.02% based on the most recent earnings level of US$300m to the final forecast of US$321m 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 $0.77 in the final year of forecast compared to the current $0.55 EPS today. Contraction in the bottom line seems to suggest cost outpacing top line growth of 2.3% over the next few years. Furthermore, the current 13% margin is expected to contract to 13% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Computershare, there are three fundamental factors 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 Computershare 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 Computershare is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Computershare? 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.
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