United Carpets Group PLC’s (LON:UCG) released its most recent earnings update in March 2018, which signalled that the business experienced a slight headwind with earnings declining from UK£1m to UK£1m, a change of -0.2%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive United Carpets Group’s earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for this coming year seems pessimistic, with earnings declining by a double-digit -30%. In the next couple of years, earnings are expected to continue to be below today’s level, with a decline of -22% in 2020, eventually reaching UK£1m in 2021.
Although it is informative understanding the rate of growth each year relative to today’s level, it may be more valuable to gauge the rate at which the company is rising or falling every year, on average. The advantage of this technique is that we can get a better picture of the direction of United Carpets Group’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate 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 -4.2%. This means that, we can expect United Carpets Group will chip away at a rate of -4.2% every year for the next couple of years.
For United Carpets Group, I’ve put together three pertinent 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 UCG 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 UCG is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of UCG? 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 firstname.lastname@example.org.