McPherson's Limited's (ASX:MCP) most recent earnings announcement in July 2019 indicated that the business benefited from a strong tailwind, eventuating to a double-digit earnings growth of 21%. Below, I've laid out key growth figures on how market analysts predict McPherson's's earnings growth trajectory over the next few 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.
Analysts' outlook for next year seems rather subdued, with earnings expanding by a single digit 5.5%. The growth outlook in the following year seems much more positive with rates arriving at double digit 18% compared to today’s earnings, and finally hitting AU$18m by 2022.
Even though it’s informative understanding the growth year by year relative to today’s figure, it may be more valuable evaluating the rate at which the earnings are moving on average every year. The benefit of this method is that we can get a bigger picture of the direction of McPherson's'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've inserted 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 10.0%. This means that, we can anticipate McPherson's will grow its earnings by 10.0% every year for the next few years.
For McPherson's, I've compiled three relevant factors 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 MCP 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 MCP is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MCP? 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.