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Auswide Bank Ltd (ASX:ABA): Immense Growth Potential?

Simply Wall St

Based on Auswide Bank Ltd's (ASX:ABA) earnings update on 30 June 2019, analyst forecasts seem in-line with its track record, as upcoming earnings growth is expected to be 6.1% next year, similar to the range of average earnings growth for the past five years of 6.7% per year. Currently with trailing-twelve-month earnings of AU$17m, we can expect this to reach AU$18m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Auswide Bank

Exciting times ahead?

Over the next three years, it seems the consensus view of the 2 analysts covering ABA is skewed towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for ABA, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

ASX:ABA Past and Future Earnings, August 27th 2019

This results in an annual growth rate of 6.8% based on the most recent earnings level of AU$17m to the final forecast of AU$21m by 2022. EPS reaches A$0.50 in the final year of forecast compared to the current A$0.41 EPS today. Margins are currently sitting at 24%, which is expected to expand to 26% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Auswide Bank, I've compiled three important 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 Auswide Bank 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 Auswide Bank is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Auswide Bank? 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.