Acacia Communications Inc’s (NASDAQ:ACIA) earnings per share contraction is expected to be a double-digit -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. I am going to look at the latest data on ACIA to assess whether this adverse expected growth is reasonable. View our latest analysis for Acacia Communications
Adverse times ahead
The bad news for investors of ACIA is that a drop in earnings is on the cards. This is based on 11 analysts who estimate earnings dropping to $2.556 from previous levels of around $3.253. This would be a drop of -21.43%, so it will be an interesting ride for any existing shareholders over the next couple of years. During the same time and profit is predicted to dip 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 helpful indicator for future performance for a stock. We can determine whether this level of expected growth is relatively reasonable or whether the negative outlook is too harsh. ACIA is expected to face a significant change from a previous double-digit growth of 83.79%, 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, there are three essential aspects 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 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.