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On 31 December 2018, Ares Commercial Real Estate Corporation (NYSE:ACRE) released its most recent earnings update. Generally, it seems that analyst forecasts are fairly pessimistic, with profits predicted to drop by -2.0% next year against the past 5-year average growth rate of 13%. With trailing-twelve-month net income at current levels of US$39m, the consensus growth rate suggests that earnings will decline to US$38m by 2020. Below is a brief commentary around Ares Commercial Real Estate’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
The 6 analysts covering ACRE 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 reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of US$39m and the final forecast of US$49m by 2022, the annual rate of growth for ACRE’s earnings is 3.1%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $1.19 in the final year of forecast compared to the current $1.35 EPS today. With a current profit margin of 70%, this movement will result in a margin of 72% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Ares Commercial Real Estate, I’ve compiled three important factors 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 Ares Commercial Real Estate 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 Ares Commercial Real Estate is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ares Commercial Real Estate? 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.