Will Synlait Milk Limited’s (NZSE:SML) Earnings Grow In The Next 12 Months?

Based on Synlait Milk Limited’s (NZSE:SML) earnings update in January 2018, analysts seem cautiously bearish, as a 18.85% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 37.46%. Currently with earnings of NZ$38.22m, we can expect this to reach NZ$45.43m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here. See our latest analysis for Synlait Milk

What can we expect from Synlait Milk in the longer term?

The 5 analysts covering SML view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of SML’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
NZSE:SML Future Profit July 10th 18
NZSE:SML Future Profit July 10th 18
From the current net income level of NZ$38.22m and the final forecast of NZ$66.87m by 2021, the annual rate of growth for SML’s earnings is 15.43%. EPS reaches NZ$0.66 in the final year of forecast compared to the current NZ$0.22 EPS today. Growth in the bottom line seems to suggest cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 5.04%, which is expected to expand to 6.60% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Synlait Milk, I’ve put together three key factors you should look at:

  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 Synlait Milk 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 Synlait Milk is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Synlait Milk? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!