Acacia Communications Inc (NASDAQ:ACIA) is predicted to shrink its earnings per share by an unfavourable double-digit of -21.43% over the next three years. At a current EPS of $3.253, this adverse movement means shareholders can expect an impending EPS of $2.556. To determine whether this negative growth rate expectation is justified, we should take a look at how the company has been performing in the past. Check out our latest analysis for Acacia Communications
Troubled times ahead
The bad news for investors of ACIA is that a drop in earnings is on the cards. Analysts covering the company are expecting the EPS to drop down to $2.556, a significant decline from previous levels of around $3.253. During the same time and net income is predicted to drop from $123M to $96M in the next couple of years. In addition to this, at the current levels of revenue and profit, margins are certainly underwhelming.
Is the contraction built on solid basis?
The past can be a great indicator for future performance for a stock. We can determine whether this level of expected growth is relatively justified or whether the negative sentiment is too pessimistic. ACIA is expected to face a significant change from a previous double-digit growth of 418.96%, over the last five years, to a forecast double-digit decline by analysts. This is highly pessimistic and may be a sign of an investment period for ACIA, incurring higher expense growth than revenue.
For ACIA, I’ve put together three essential aspects 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 ACIA 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 ACIA is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of ACIA? 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 pass 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.