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The most recent earnings release Regional Management Corp.'s (NYSE:RM) announced in December 2018 signalled that the company experienced a robust tailwind, eventuating to a double-digit earnings growth of 18%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Regional Management's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts' prospects for next year seems optimistic, with earnings growing by a robust 23%. This growth seems to continue into the following year with rates arriving at double digit 39% compared to today’s earnings, and finally hitting US$57m by 2022.
Even though it’s useful to understand the rate of growth each year relative to today’s value, it may be more valuable to evaluate the rate at which the business is rising or falling on average every year. The benefit of this method is that it ignores near term flucuations and accounts for the overarching direction of Regional Management's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 15%. This means, we can presume Regional Management will grow its earnings by 15% every year for the next couple of years.
For Regional Management, I've compiled three fundamental 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 RM 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 RM is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RM? 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.