Since Scales Corporation Limited (NZSE:SCL) released its earnings in December 2018, analyst forecasts seem fairly subdued, with earnings expected to grow by 1.8% in the upcoming year compared with the higher past 5-year average growth rate of 11%. By 2020, we can expect Scales’s bottom line to reach NZ$29m, a jump from the current trailing-twelve-month of NZ$29m. Below is a brief commentary on the longer term outlook the market has for Scales. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
Over the next three years, it seems the consensus view of the 3 analysts covering SCL is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. 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 SCL’s earnings growth over these next few years.
This results in an annual growth rate of 9.1% based on the most recent earnings level of NZ$29m to the final forecast of NZ$36m by 2022. EPS reaches NZ$0.25 in the final year of forecast compared to the current NZ$0.20 EPS today. Margins are currently sitting at 7.1%, which is expected to expand to 7.5% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Scales, there are three key aspects 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 Scales 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 Scales is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Scales? 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 firstname.lastname@example.org. 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.