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How Do Analysts See Rural Funds Group (ASX:RFF) Performing In The Next Couple Of Years?

In June 2018, Rural Funds Group (ASX:RFF) announced its most recent earnings update, which confirmed that the company faced a substantial headwind with earnings falling by -16.8%. Below is a brief commentary on my key takeaways on how market analysts perceive Rural Funds Group’s earnings growth trajectory over the next couple of 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.

View our latest analysis for Rural Funds Group

Market analysts’ consensus outlook for next year seems buoyant, with earnings increasing by a robust 32.5%. This growth seems to continue into the following year with rates arriving at double digit 48.5% compared to today’s earnings, and finally hitting AU$55.8m by 2021.

ASX:RFF Future Profit September 4th 18
ASX:RFF Future Profit September 4th 18

While it is informative understanding the growth rate each year relative to today’s figure, it may be more beneficial to determine the rate at which the business is moving every year, on average. The pro of this approach is that we can get a bigger picture of the direction of Rural Funds Group’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 put 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 13.5%. This means, we can presume Rural Funds Group will grow its earnings by 13.5% every year for the next few years.

Next Steps:

For Rural Funds Group, I’ve put together three key 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 RFF 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 RFF is currently mispriced by the market.

  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RFF? 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.

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