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Will Abcam plc’s (LON:ABC) Earnings Grow Over The Next Few Years?

The most recent earnings update Abcam plc’s (LON:ABC) released in June 2018 showed that the business gained from a robust tailwind, leading to a double-digit earnings growth of 47%. Below is my commentary, albeit very simple and high-level, on how market analysts predict Abcam’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Abcam

Analysts’ expectations for the upcoming year seems pessimistic, with earnings reducing by -0.8%. But in the following year, there is a complete contrast in performance, with reaching double digit 11% compared to today’s level and continues to increase to UK£80m in 2021.

AIM:ABC Future Profit December 8th 18

Although it is informative understanding the rate of growth year by year relative to today’s value, it may be more insightful evaluating the rate at which the earnings are moving every year, on average. The benefit of this technique is that we can get a better picture of the direction of Abcam’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 11%. This means, we can expect Abcam will grow its earnings by 11% every year for the next couple of years.

Next Steps:

For Abcam, there are three fundamental factors you should further examine:

  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 ABC 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 ABC is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ABC? 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 editorial-team@simplywallst.com.