Steppe Cement Ltd. (LON:STCM): Is It A Smart Long Term Opportunity?

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Based on Steppe Cement Ltd.’s (LON:STCM) earnings update in December 2018, the consensus outlook from analysts appear highly confident, with profits predicted to ramp up by an impressive 52% next year, compared with the previous 5-year average growth rate of 16%. With trailing-twelve-month net income at current levels of US$8.9m, we should see this rise to US$14m in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Steppe Cement

What can we expect from Steppe Cement in the longer term?

Over the next three years, it seems the consensus view of the 1 analysts covering STCM 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 STCM, 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:STCM Past and Future Earnings, June 16th 2019
AIM:STCM Past and Future Earnings, June 16th 2019

By 2022, STCM’s earnings should reach US$15m, from current levels of US$8.9m, resulting in an annual growth rate of 7.4%. EPS reaches $0.071 in the final year of forecast compared to the current $0.041 EPS today. With a current profit margin of 11%, this movement will result in a margin of 17% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Steppe Cement, I’ve compiled three essential aspects you should further research:

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