How Do Analysts See Ares Commercial Real Estate Corporation (NYSE:ACRE) Performing In The Years Ahead?

In December 2018, Ares Commercial Real Estate Corporation (NYSE:ACRE) released its most recent earnings announcement, which indicated that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 27%. Below is my commentary, albeit very simple and high-level, on how market analysts view Ares Commercial Real Estate’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Ares Commercial Real Estate

Market analysts’ consensus outlook for the coming year seems pessimistic, with earnings declining by -0.5%. But in the following year, there is a complete contrast in performance, with reaching double digit 3.9% compared to today’s level and continues to increase to US$45m in 2022.

NYSE:ACRE Past and Future Earnings, March 21st 2019
NYSE:ACRE Past and Future Earnings, March 21st 2019

Although it is helpful to understand the rate of growth each year relative to today’s figure, it may be more beneficial to gauge the rate at which the earnings are rising or falling every year, on average. The pro of this approach is that we can get a better picture of the direction of Ares Commercial Real Estate’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’ve appended 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 3.9%. This means, we can presume Ares Commercial Real Estate will grow its earnings by 3.9% every year for the next few years.

Next Steps:

For Ares Commercial Real Estate, I’ve compiled three fundamental aspects you should further examine:

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