With analysts expecting CoreLogic Inc (NYSE:CLGX) to record noticeable earnings growth of 46.61% over the next year, let’s stop and consider this positive outlook. Investors should consider the forces that are spurring this projected increase, as the return realised by shareholders may look different in the future if underlying assumptions are not realised. To help investors get a top level understanding, this article will interpret CoreLogic’s margin performance to assist in analysing the revenue and cost anatomy behind the earnings expectations for the future and the impact it has on shareholder returns relative to the wider industry.
A closer look at CLGX’s profit margin
At a high level, a company’s ability to earn on their sales efforts can play an important role in determining shareholder value. CLGX’s profit margin will help us understand the extent of this ability, as well as identify the forces behind earnings expectations.
Margin Calculation for CLGX
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = 90.70 Million ÷ 1.87 Billion = 4.85%
The past five years have seen CoreLogic’s margin expand, due to average net income growth of 9.90% outstripping average revenue growth of 7.37%, which suggests that the company has been able to convert a larger percentage of revenue into net income whilst grow their top line at the same time. The current 4.85% margin seems to continue this movement, indicating that earnings growth has likely been driven through improved cost management alongside the benefits of revenue growth.
Understanding what could be driving CoreLogic’s future earnings
Based on future expectations, CLGX’s profit margin will further the previous expansion, with 1.58% in expected annual revenue growth and a forecasted 22.80% in annual net income growth. This suggests future earnings growth is driven further by enhanced cost efficiency alongside revenue increases, which is enlarging the incremental amount of net income that is retained from the forecasted revenue growth. Nonetheless, those interested in the company should remember that a expanding margin can hold various implications on the company’s performance depending on how it operates, which makes further research very important. Profit margins are commonly useful when employed as a comparitive measure to judge a business’ profit-making ability against its industry. For CoreLogic in particular, future profit margin is expected to expand simultaneously with margins in the IT industry, whilst at the same time, CoreLogic’s projected ROE of 13.11% is relatively similar to the industry’s 13.86% expectation, but debt levels need to be considered before accpeting this observation. This serves as an indication that analysts covering the stock expect the nature of CoreLogic’s earnings will result in a return per dollar of equity that is similar to the industry. But before moving forward, it must be remembered that bottom line earnings and profit margins are susceptible to being manipulated and don’t always give the full picture. Thus, it is essential to run your own analysis on CoreLogic’s future earnings whilst maintaining a watchful eye over the sustainability of their cost management methods and the runway for top line growth.
For CLGX, there are three essential 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 CLGX 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 CLGX is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CLGX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!