Looking at Augusta Capital Limited's (NZSE:AUG) earnings update in March 2019, analyst forecasts appear to be pessimistic, with profits predicted to drop by 17% next year. Though this pessimism is not unfounded, given the 5-year track record of negative growth. With trailing-twelve-month net income at current levels of NZ$6.9m, the consensus growth rate suggests that earnings will decline to NZ$5.8m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Augusta Capital in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is Augusta Capital going to perform in the near future?
Over the next three years, it seems the consensus view of the 2 analysts covering AUG is skewed towards the negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of AUG's earnings growth over these next few years.
By 2022, AUG's earnings should reach NZ$6.2m, from current levels of NZ$6.9m, resulting in an annual growth rate of -2.6%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of NZ$0.085 in the final year of forecast compared to the current NZ$0.079 EPS today. Fall in earnings appears to be a result of a reduction in the top line of -6.2%, squeezing the bottom line. With a current profit margin of 29%, this movement will result in a margin of 31% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Augusta Capital, there are three pertinent aspects 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 Augusta Capital 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 Augusta Capital is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Augusta Capital? 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.