In June 2019, First Derivatives plc (LON:FDP) released its most recent earnings announcement, which suggested that the business gained from a robust tailwind, leading to a double-digit earnings growth of 29%. Today I want to provide a brief commentary on how market analysts view First Derivatives's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts' outlook for the coming year seems buoyant, with earnings rising by a robust 29%. This growth seems to continue into the following year with rates arriving at double digit 50% compared to today’s earnings, and finally hitting UK£23m by 2022.
While it’s useful to understand the growth rate each year relative to today’s figure, it may be more insightful gauging the rate at which the company is growing on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of First Derivatives's earnings trajectory over time, 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 16%. This means, we can expect First Derivatives will grow its earnings by 16% every year for the next couple of years.
For First Derivatives, 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 FDP 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 FDP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FDP? 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.