After Adairs Limited's (ASX:ADH) earnings announcement on 30 June 2019, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 2.3% next year against the higher past 5-year average growth rate of 29%. Currently with trailing-twelve-month earnings of AU$30m, we can expect this to reach AU$30m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How is Adairs going to perform in the near future?
The longer term expectations from the 6 analysts of ADH is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. 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 ADH's earnings growth over these next few years.
By 2022, ADH's earnings should reach AU$34m, from current levels of AU$30m, resulting in an annual growth rate of 5.6%. EPS reaches A$0.20 in the final year of forecast compared to the current A$0.18 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 8.6% to 8.2% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Adairs, I've put together three essential aspects 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 Adairs 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 Adairs is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Adairs? 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 firstname.lastname@example.org. 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.