On 30 September 2018, Ares Commercial Real Estate Corporation (NYSE:ACRE) released its earnings update. Generally, analyst forecasts seem fairly subdued, as a 8.6% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 14%. Presently, with latest-twelve-month earnings at US$35m, we should see this growing to US$38m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Ares Commercial Real Estate in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How is Ares Commercial Real Estate going to perform in the near future?
The longer term expectations from the 6 analysts of ACRE is tilted towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of ACRE’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.
This results in an annual growth rate of 6.1% based on the most recent earnings level of US$30m to the final forecast of US$41m by 2021. This leads to an EPS of $1.19 in the final year of projections relative to the current EPS of $1.07. Growth in the bottom line seems to suggest cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. In 2021, ACRE’s profit margin will have expanded from 66% to 71%.
Future outlook is only one aspect when you’re building an investment case for a stock. For Ares Commercial Real Estate, there are three pertinent aspects you should look at:
- 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!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.