On 30 September 2018, Centamin plc (LON:CEY) released its most recent earnings update. Generally, analyst forecasts appear to be pessimistic, with profits predicted to drop by -16% next year relative to the past 5-year average growth rate of 0.07%. With trailing-twelve-month net income at current levels of US$112m, the consensus growth rate suggests that earnings will decline to US$93m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How is Centamin going to perform in the near future?
Over the next three years, it seems the consensus view of the 12 analysts covering CEY 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. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of CEY’s earnings growth over these next few years.
This results in an annual growth rate of 8.3% based on the most recent earnings level of US$109m to the final forecast of US$116m by 2021. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $0.089 in the final year of forecast compared to the current $0.095 EPS today. Growth in earnings appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. However, the expansion of the current 16% margin is not expected to be sustained, as it begins to contract to 14% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Centamin, I’ve put together three key 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 Centamin 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 Centamin is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Centamin? 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 email@example.com.