City Chic Collective Limited's (ASX:CCX) most recent earnings update in August 2019 signalled that the company faced a minor headwind with earnings falling from AU$15m to AU$14m, a change of -4.6%. Below is my commentary, albeit very simple and high-level, on how market analysts predict City Chic Collective's earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts' consensus outlook for next year seems positive, with earnings rising by a robust 28%. This growth seems to continue into the following year with rates arriving at double digit 50% compared to today’s earnings, and finally hitting AU$24m by 2022.
Even though it is useful to understand the rate of growth year by year relative to today’s value, it may be more beneficial to gauge the rate at which the company is moving on average every year. The advantage of this method is that we can get a better picture of the direction of City Chic Collective'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've inserted 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 17%. This means, we can expect City Chic Collective will grow its earnings by 17% every year for the next few years.
For City Chic Collective, there are three key aspects you should further research:
- Valuation: What is CCX 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 CCX is currently mispriced by the market.
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for CCX'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 CCX? 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 email@example.com. 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.