In June 2018, Dunelm Group plc (LON:DNLM) announced its most recent earnings update, which showed that the company experienced a small tailwind, eventuating to a single-digit earnings growth of 0.3%. Below, I’ve laid out key numbers on how market analysts predict Dunelm Group’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ consensus outlook for the coming year seems optimistic, with earnings climbing by a robust 20%. This growth seems to continue into the following year with rates arriving at double digit 32% compared to today’s earnings, and finally hitting UK£105m by 2021.
While it is helpful to understand the growth rate year by year relative to today’s level, it may be more valuable estimating the rate at which the company is rising or falling on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Dunelm Group’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 put 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 12%. This means, we can anticipate Dunelm Group will grow its earnings by 12% every year for the next few years.
For Dunelm Group, there are three important aspects you should further examine:
- 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 DNLM 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 DNLM is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DNLM? 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.