What Can We Expect From Electrocomponents plc’s (LON:ECM) Earnings Over The Next Year?

After Electrocomponents plc’s (LON:ECM) recent earnings announcement in March 2018, analyst forecasts appear to be pessimistic, as a -1.4% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 4.4%. Currently with a railing-twelve-month profit of UK£149.6m, the consensus growth rate suggests that earnings will drop to UK£147.6m by 2019. Below is a brief commentary on the longer term outlook the market has for Electrocomponents. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Electrocomponents

Can we expect Electrocomponents to keep growing?

Longer term expectations from the 10 analysts covering ECM’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for ECM, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

By 2021, ECM’s earnings should reach UK£187.5m, from current levels of UK£149.6m, resulting in an annual growth rate of 8.6%. EPS reaches £0.43 in the final year of forecast compared to the current £0.34 EPS today. The main reason for growth is a result of cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 8.8%, which is expected to expand to 9.2% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Electrocomponents, there are three essential aspects you should further research:

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