St Barbara Limited's (ASX:SBM) latest earnings update in August 2019 showed that the business faced a major headwind with earnings falling by -36%. Below is a brief commentary on my key takeaways on how market analysts view St Barbara's earnings growth outlook over the next few years and whether the future looks brighter. 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 this coming year seems buoyant, with earnings increasing by a robust 34%. However, earnings is forecasted to fall thereafter, reaching AU$171m in 2022.
While it is useful to be aware of the rate of growth year by year relative to today’s value, it may be more beneficial evaluating the rate at which the business is moving on average every year. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of St Barbara's earnings trajectory over time, be more volatile. To compute this rate, I've appended 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 4.9%. This means, we can assume St Barbara will grow its earnings by 4.9% every year for the next few years.
For St Barbara, there are three relevant factors you should further examine:
- Valuation: What is SBM 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 SBM is currently mispriced by the market.
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for SBM's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SBM? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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