PPHE Hotel Group Limited (LON:PPH): Set To Experience A Decrease In Earnings?

Since PPHE Hotel Group Limited (LON:PPH) released its earnings in June 2018, the consensus outlook from analysts appear bearish, as a -8.9% fall in profits is expected in the upcoming year against the past 5-year average growth rate of 5.5%. With trailing-twelve-month net income at current levels of UK£24m, the consensus growth rate suggests that earnings will decline to UK£22m by 2019. Below is a brief commentary around PPHE Hotel Group’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for PPHE Hotel Group

How is PPHE Hotel Group going to perform in the near future?

Over the next three years, it seems the consensus view of the 4 analysts covering PPH is skewed towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for PPH, 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.

LSE:PPH Future Profit December 2nd 18
LSE:PPH Future Profit December 2nd 18

This results in an annual growth rate of 0.4% based on the most recent earnings level of UK£24m to the final forecast of UK£23m by 2021. EPS reaches £0.84 in the final year of forecast compared to the current £0.57 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 7.5% to 6.6% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For PPHE Hotel Group, there are three key 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 PPHE Hotel Group 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 PPHE Hotel Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PPHE Hotel Group? 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.