What Should We Expect From Auto Trader Group plc’s (LON:AUTO) Earnings In The Year Ahead?

In September 2018, Auto Trader Group plc (LON:AUTO) announced its earnings update. Overall, analyst forecasts seem fairly subdued, as a 8.4% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 42%. By 2020, we can expect Auto Trader Group’s bottom line to reach UK£186m, a jump from the current trailing-twelve-month of UK£171m. 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.

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Can we expect Auto Trader Group to keep growing?

The longer term view from the 15 analysts covering AUTO is one of 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 understand the overall trajectory of AUTO’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:AUTO Future Profit January 18th 19
LSE:AUTO Future Profit January 18th 19

From the current net income level of UK£171m and the final forecast of UK£217m by 2022, the annual rate of growth for AUTO’s earnings is 8.4%. This leads to an EPS of £0.25 in the final year of projections relative to the current EPS of £0.18. In 2022, AUTO’s profit margin will have expanded from 52% to 55%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Auto Trader Group, I’ve put together three fundamental factors you should further examine:

  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 Auto Trader 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 Auto Trader Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Auto Trader 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!

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 editorial-team@simplywallst.com.