Based on Big Yellow Group Plc’s (LON:BYG) earnings update on 30 September 2018, analysts seem cautiously bearish, with profits predicted to rise by 10% next year against the higher past 5-year average growth rate of 15%. With trailing-twelve-month net income at current levels of UK£134m, we should see this rise to UK£147m in 2019. Below is a brief commentary on the longer term outlook the market has for Big Yellow Group. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Can we expect Big Yellow Group to keep growing?
Over the next three years, it seems the consensus view of the 6 analysts covering BYG is skewed towards the negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around 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.
By 2021, BYG’s earnings should reach UK£107m, from current levels of UK£134m, resulting in an annual growth rate of -11%. This leads to an EPS of £0.63 in the final year of projections relative to the current EPS of £0.85. The main reason for BYG’s earnings contraction is cost outpacing top line growth of 6.4% over the next few years. With this high cost growth, margins is expected to contract from 114% to 73% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Big Yellow Group, there are three pertinent aspects you should further research:
- 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.
- Valuation: What is Big Yellow Group 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 Big Yellow Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Big Yellow Group? 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 email@example.com.