Based on Culp Inc’s (NYSE:CULP) earnings update in April 2018, the consensus outlook from analysts appear pessimistic, as a -15.2% fall in profits is expected in the upcoming year against the past 5-year average growth rate of 3.8%. With trailing-twelve-month net income at current levels of US$20.9m, the consensus growth rate suggests that earnings will decline to US$17.7m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
Over the next three years, it seems the consensus view of the 2 analysts covering CULP is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for CULP, 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.
By 2021, CULP’s earnings should reach US$21.1m, from current levels of US$20.9m, resulting in an annual growth rate of 3.7%. EPS reaches $1.68 in the final year of forecast compared to the current $1.68 EPS today. The primary reason for earnings growth is due to top-line expansion of 4.2%, dropping down to the bottome-line. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 6.4% to 5.7% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Culp, I’ve put together three relevant 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 Culp 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 Culp is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Culp? 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 firstname.lastname@example.org.