Morses Club PLC (LON:MCL): What Are The Future Prospects?

Based on Morses Club PLC’s (LON:MCL) earnings update in February 2019, analysts seem cautiously optimistic, as a 2.2% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of -8.6%. Currently with trailing-twelve-month earnings of UK£16m, we can expect this to reach UK£17m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.

View our latest analysis for Morses Club

What can we expect from Morses Club in the longer term?

The view from 6 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for MCL, 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.

AIM:MCL Past and Future Earnings, August 20th 2019
AIM:MCL Past and Future Earnings, August 20th 2019

By 2022, MCL’s earnings should reach UK£21m, from current levels of UK£16m, resulting in an annual growth rate of 12%. EPS reaches £0.16 in the final year of forecast compared to the current £0.12 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 14% to 13% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Morses Club, I’ve compiled three pertinent aspects you should look at:

  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 Morses Club 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 Morses Club is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Morses Club? 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.