Ultra Electronics Holdings plc (LON:ULE): Is It A Smart Long Term Opportunity?

Since Ultra Electronics Holdings plc (LON:ULE) released its earnings in December 2018, analysts seem highly optimistic, as a 83% rise in profits is expected in the upcoming year, relative to the historical 5-year average growth rate of 12%. With trailing-twelve-month net income at current levels of UK£32m, we should see this rise to UK£59m in 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 Ultra Electronics Holdings

Can we expect Ultra Electronics Holdings to keep growing?

The longer term view from the 11 analysts covering ULE is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ULE’s earnings growth over these next few years.

LSE:ULE Past and Future Earnings, August 6th 2019
LSE:ULE Past and Future Earnings, August 6th 2019

From the current net income level of UK£32m and the final forecast of UK£65m by 2022, the annual rate of growth for ULE’s earnings is 16%. EPS reaches £0.87 in the final year of forecast compared to the current £0.44 EPS today. Margins are currently sitting at 4.2%, which is expected to expand to 7.7% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Ultra Electronics Holdings, I’ve put together three important factors you should further examine:

  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 Ultra Electronics Holdings 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 Ultra Electronics Holdings is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ultra Electronics Holdings? 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 editorial-team@simplywallst.com. 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.