Looking at Biffa plc’s (LON:BIFF) earnings update in March 2018, the consensus outlook from analysts appear fairly confident, as a 25% increase in profits is expected in the upcoming year, though this is evidently lower than the historical 5-year average earnings growth of 62%. Presently, with latest-twelve-month earnings at UK£31m, we should see this growing to UK£39m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Biffa in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
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How will Biffa perform in the near future?
Over the next three years, it seems the consensus view of the 5 analysts covering BIFF is skewed towards the 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 13% based on the most recent earnings level of UK£31m to the final forecast of UK£47m by 2021. EPS reaches £0.18 in the final year of forecast compared to the current £0.12 EPS today. The bottom-line growth seems to be caused by reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, BIFF’s profit margin will have expanded from 2.9% to 3.9%.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Biffa, I’ve put together three relevant aspects 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 Biffa 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 Biffa is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Biffa? 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.