On 31 March 2019, Ubiquiti Networks, Inc. (NASDAQ:UBNT) announced its latest earnings update. Overall, analyst forecasts appear to be pessimistic, with earnings expected to decline by 8.9% in the upcoming year compared with the past 5-year average growth rate of 12%. Presently, with latest-twelve-month earnings at US$196m, we should see this fall to US$179m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Ubiquiti Networks in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.
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How is Ubiquiti Networks going to perform in the near future?
Longer term expectations from the 4 analysts covering UBNT’s stock is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for UBNT, 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.
From the current net income level of US$196m and the final forecast of US$192m by 2022, the annual rate of growth for UBNT’s earnings is -0.6%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $4.58 in the final year of forecast compared to the current $2.54 EPS today. Contraction in the bottom line seems to suggest top-line expansion of 6.0%, which is predicted to lag cost growth leading up to 2022. With this high cost growth, margins is expected to contract from 19% to 16% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Ubiquiti Networks, I’ve put together three important 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 Ubiquiti Networks 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 Ubiquiti Networks is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ubiquiti Networks? 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.