Based on CSR Limited's (ASX:CSR) earnings update in March 2019, analyst consensus outlook appear pessimistic, with earnings expected to decline by 3.7% in the upcoming year relative to the past 5-year average growth rate of 8.5%. Currently with a trailing-twelve-month profit of AU$139m, the consensus growth rate suggests that earnings will drop to AU$134m by 2020. Below is a brief commentary around CSR's earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
What can we expect from CSR in the longer term?
Longer term expectations from the 9 analysts covering CSR’s stock is one of negative sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of AU$139m and the final forecast of AU$131m by 2022, the annual rate of growth for CSR’s earnings is -2.7%. This leads to an EPS of A$0.27 in the final year of projections relative to the current EPS of A$0.28. Contraction in the bottom line seems to suggest a reduction in the top line of -1.4%, squeezing the bottom line. By 2022, margins are projected to decline from 6.0% to 5.8% as a result in a faster fall in profits.
Future outlook is only one aspect when you're building an investment case for a stock. For CSR, I've compiled three pertinent aspects you should further examine:
- Valuation: What is CSR 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 CSR is currently mispriced by the market.
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for CSR'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 CSR? 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.