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Cabot Microelectronics Corporation (NASDAQ:CCMP): Immense Growth Potential?

Simply Wall St

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In March 2019, Cabot Microelectronics Corporation (NASDAQ:CCMP) announced its earnings update. Overall, analyst consensus outlook appear vastly optimistic, as a 59% rise in profits is expected in the upcoming year, relative to the previous 5-year average growth rate of 18%. With trailing-twelve-month net income at current levels of US$110m, we should see this rise to US$175m in 2020. Below is a brief commentary on the longer term outlook the market has for Cabot Microelectronics. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Cabot Microelectronics

How will Cabot Microelectronics perform in the near future?

Over the next three years, it seems the consensus view of the 3 analysts covering CCMP is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of CCMP's earnings growth over these next few years.

NasdaqGS:CCMP Past and Future Earnings, June 27th 2019

This results in an annual growth rate of 18% based on the most recent earnings level of US$110m to the final forecast of US$262m by 2022. This leads to an EPS of $10.15 in the final year of projections relative to the current EPS of $4.31. Margins are currently sitting at 19%, which is expected to expand to 27% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Cabot Microelectronics, there are three fundamental factors you should further research:

  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 Cabot Microelectronics 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 Cabot Microelectronics is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Cabot Microelectronics? 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.