On 31 December 2018, Amerisafe, Inc. (NASDAQ:AMSF) announced its latest earnings update. Overall, analyst forecasts seem bearish, with earnings expected to decline by -9.6% in the upcoming year against the past 5-year average growth rate of 3.0%. With trailing-twelve-month net income at current levels of US$72m, the consensus growth rate suggests that earnings will decline to US$65m by 2020. 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.
How is Amerisafe going to perform in the near future?
The longer term view from the 4 analysts covering AMSF is one of negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for AMSF, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of -3.3% based on the most recent earnings level of US$72m to the final forecast of US$70m by 2022. This leads to an EPS of $3.6 in the final year of projections relative to the current EPS of $3.73. Fall in earnings appears to be a result of cost outpacing top line growth of 2.5% over the next few years. Furthermore, the current 19% margin is expected to contract to 16% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Amerisafe, I’ve put together three pertinent factors 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 Amerisafe 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 Amerisafe is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Amerisafe? 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 email@example.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.