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Aspen Technology, Inc. (NASDAQ:AZPN): Set To Experience A Decrease In Earnings?

Simply Wall St

On 30 June 2019, Aspen Technology, Inc. (NASDAQ:AZPN) announced its latest earnings update. Overall, analyst consensus outlook appear pessimistic, with profits predicted to drop by 19% next year relative to the past 5-year average growth rate of 11%. Currently with a trailing-twelve-month profit of US$263m, the consensus growth rate suggests that earnings will drop to US$214m by 2020. Below is a brief commentary on the longer term outlook the market has for Aspen Technology. For those interested in more of an analysis of the company, you can research its fundamentals here.

View our latest analysis for Aspen Technology

How will Aspen Technology perform in the near future?

Over the next three years, it seems the consensus view of the 9 analysts covering AZPN is skewed towards the positive 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.

NasdaqGS:AZPN Past and Future Earnings, August 9th 2019

By 2022, AZPN's earnings should reach US$271m, from current levels of US$263m, resulting in an annual growth rate of 0.02%. EPS reaches $3.8 in the final year of forecast compared to the current $3.76 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 44% to 39% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Aspen Technology, I've compiled three pertinent factors you should further examine:

  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 Aspen Technology 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 Aspen Technology is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Aspen Technology? 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 editorial-team@simplywallst.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.