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What Are Analysts Saying About HomeServe plc’s (LON:HSV) Growth?

After HomeServe plc’s (LON:HSV) earnings announcement in March 2018, analyst consensus outlook appear cautiously subdued, as a 10% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 25%. Currently with trailing-twelve-month earnings of UK£96m, we can expect this to reach UK£106m by 2019. Below is a brief commentary on the longer term outlook the market has for HomeServe. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

See our latest analysis for HomeServe

How is HomeServe going to perform in the near future?

The view from 7 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. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

LSE:HSV Future Profit November 20th 18

From the current net income level of UK£96m and the final forecast of UK£132m by 2021, the annual rate of growth for HSV’s earnings is 9.6%. This leads to an EPS of £0.40 in the final year of projections relative to the current EPS of £0.30. Growth in earnings appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, HSV’s profit margin will have expanded from 11% to 12%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For HomeServe, I’ve put together three relevant factors you should look at:

  1. 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.
  2. Valuation: What is HomeServe 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 HomeServe is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of HomeServe? 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 editorial-team@simplywallst.com.