The most recent earnings update St. Modwen Properties PLC’s (LON:SMP) released in November 2018 showed that the company benefited from a small tailwind, eventuating to a single-digit earnings growth of 1.0%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive St. Modwen Properties’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ prospects for the coming year seems optimistic, with earnings rising by a robust 40%. This growth seems to continue into the following year with rates arriving at double digit 47% compared to today’s earnings, and finally hitting UK£100m by 2022.
Although it is useful to understand the growth rate each year relative to today’s level, it may be more valuable to gauge the rate at which the company is growing every year, on average. The pro of this method is that we can get a bigger picture of the direction of St. Modwen Properties’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 15%. This means, we can expect St. Modwen Properties will grow its earnings by 15% every year for the next couple of years.
For St. Modwen Properties, I’ve compiled three key 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.
- Valuation: What is SMP 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 SMP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SMP? 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.