What Do Analysts Think About Northgate plc’s (LON:NTG) Earnings Trajectory?

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In June 2019, Northgate plc (LON:NTG) announced its most recent earnings update, which indicated that the business gained from a strong tailwind, leading to a double-digit earnings growth of 19%. Below is my commentary, albeit very simple and high-level, on how market analysts view Northgate’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.

See our latest analysis for Northgate

Market analysts’ consensus outlook for this coming year seems rather subdued, with earnings climbing by a single digit 5.0%. The following year doesn’t look much more exciting, though earnings does reach UK£60m in 2022.

LSE:NTG Past and Future Earnings, July 8th 2019
LSE:NTG Past and Future Earnings, July 8th 2019

Although it’s helpful to be aware of the rate of growth year by year relative to today’s value, it may be more valuable to determine the rate at which the company is moving every year, on average. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Northgate’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 4.5%. This means that, we can anticipate Northgate will grow its earnings by 4.5% every year for the next few years.

Next Steps:

For Northgate, I’ve put together three fundamental factors 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 NTG 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 NTG is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NTG? 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 editorial-team@simplywallst.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.