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Mereo BioPharma Group plc’s (LON:MPH) latest earnings update in April 2019 signalled company earnings became less negative compared to the previous year’s level – great news for investors Today I want to provide a brief commentary on how market analysts perceive Mereo BioPharma Group’s earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for next year seems pessimistic, with earnings becoming even more negative, reaching -UK£40.0m in 2020. Moreover, earnings are expected to fall off in the following year, before bouncing back up again to -UK£39.5m in 2022.
Even though it is informative knowing the rate of growth each year relative to today’s value, it may be more valuable to evaluate the rate at which the earnings are growing every year, on average. The advantage of this approach is that we can get a bigger picture of the direction of Mereo BioPharma Group’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 40%. This means, we can anticipate Mereo BioPharma Group will grow its earnings by 40% every year for the next couple of years.
For Mereo BioPharma Group, I’ve compiled three important aspects you should further research:
- 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.
- Management:Have insiders been ramping up their shares to take advantage of the market’s sentiment for MPH’s future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MPH? 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.