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CIMIC Group Limited (ASX:CIM): Will The Growth Last?

Simply Wall St

Based on CIMIC Group Limited’s (ASX:CIM) earnings update on 31 December 2018, analyst consensus outlook appear cautiously subdued, with profits predicted to rise by 6.0% next year relative to the higher past 5-year average growth rate of 30%. By 2020, we can expect CIMIC Group’s bottom line to reach AU$828m, a jump from the current trailing-twelve-month of AU$781m. 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.

See our latest analysis for CIMIC Group

How will CIMIC Group perform in the near future?

The longer term expectations from the 7 analysts of CIM is tilted 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.

ASX:CIM Past and Future Earnings, February 27th 2019

By 2022, CIM’s earnings should reach AU$863m, from current levels of AU$781m, resulting in an annual growth rate of 2.3%. This leads to an EPS of A$2.7 in the final year of projections relative to the current EPS of A$2.41. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 5.3% to 4.5% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For CIMIC Group, I’ve put together three fundamental aspects you should look at:

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

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.