On 31 December 2018, Elementis plc (LON:ELM) released its earnings update. Generally, analysts seem extremely confident, with earnings expected to grow by a high double-digit of 96% in the upcoming year, compared with the historical 5-year average growth rate of -13%. Currently with trailing-twelve-month earnings of US$50m, we can expect this to reach US$98m by 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.
What can we expect from Elementis in the longer term?
The view from 9 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 ELM, 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.
This results in an annual growth rate of 22% based on the most recent earnings level of US$50m to the final forecast of US$115m by 2022. This leads to an EPS of $0.20 in the final year of projections relative to the current EPS of $0.096. With a current profit margin of 6.1%, this movement will result in a margin of 11% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Elementis, there are three important factors 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 Elementis 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 Elementis is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Elementis? 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 email@example.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.