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Since First Derivatives plc (LON:FDP) released its earnings in February 2019, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 29% next year relative to the past 5-year average growth rate of 2.3%. By 2020, we can expect First Derivatives’s bottom line to reach UK£17m, a jump from the current trailing-twelve-month of UK£13m. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The view from 5 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. 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 FDP's earnings growth over these next few years.
From the current net income level of UK£13m and the final forecast of UK£23m by 2022, the annual rate of growth for FDP’s earnings is 16%. This leads to an EPS of £0.70 in the final year of projections relative to the current EPS of £0.51. In 2022, FDP's profit margin will have expanded from 6.1% to 7.6%.
Future outlook is only one aspect when you're building an investment case for a stock. For First Derivatives, I've put together three essential 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 First Derivatives 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 First Derivatives is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of First Derivatives? 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 email@example.com. 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.