Based on Assura Plc’s (LON:AGR) earnings update in March 2018, it seems that analyst forecasts are substantially optimistic, with earnings expected to grow by a high double-digit of 97% in the upcoming year, relative to the previous 5-year average growth rate of 35%. Presently, with latest-twelve-month earnings at UK£72m, we should see this growing to UK£141m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Assura in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
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How is Assura going to perform in the near future?
The longer term view from the 3 analysts covering AGR 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. 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 AGR’s earnings growth over these next few years.
This results in an annual growth rate of 8.6% based on the most recent earnings level of UK£72m to the final forecast of UK£127m by 2021. EPS reaches £0.058 in the final year of forecast compared to the current £0.037 EPS today. The bottom-line growth seems to be caused by a higher revenue growth of 11% outpacing cost increases. This initial high-growth revenue squeezes AGR’s margins. However, analysts are expecting earnings growth to catch up, and current margins of 86% to expand to 108% by the end of 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Assura, I’ve compiled three important factors you should further examine:
- 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 Assura 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 Assura is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Assura? 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.