Looking at STM Group Plc’s (LON:STM) earnings update on 31 December 2018, analyst consensus outlook appear cautiously subdued, with earnings expected to grow by -7.7% in the upcoming year compared with the higher past 5-year average growth rate of 38%. With trailing-twelve-month net income at current levels of UK£3.7m, we should see this rise to UK£3.4m in 2020. Below is a brief commentary on the longer term outlook the market has for STM Group. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The longer term view from the 1 analysts covering STM 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 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 3.9% based on the most recent earnings level of UK£3.7m to the final forecast of UK£4.1m by 2022. EPS reaches £0.066 in the final year of forecast compared to the current £0.062 EPS today. With a current profit margin of 17%, this movement will result in a margin of 19% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For STM Group, I’ve compiled three essential factors you should further examine:
- 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 STM 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 STM Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of STM 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!
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 firstname.lastname@example.org. 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.