Since Collection House Limited (ASX:CLH) released its earnings in June 2018, analyst consensus outlook appear cautiously subdued, with profits predicted to rise by 2.3% next year relative to the higher past 5-year average growth rate of 7.5%. Currently with trailing-twelve-month earnings of AU$26.1m, we can expect this to reach AU$26.7m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Collection House in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
How will Collection House perform in the near future?
The view from 4 analysts over the next three years is one of 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 understand the overall trajectory of CLH’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
By 2021, CLH’s earnings should reach AU$27.4m, from current levels of AU$26.1m, resulting in an annual growth rate of 1.2%. This leads to an EPS of A$0.19 in the final year of projections relative to the current EPS of A$0.19. Growth in earnings appears to be a result of a higher revenue growth of 3.2% outpacing cost increases. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 18.2% to 17.5% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Collection House, I’ve compiled three key factors 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 Collection House 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 Collection House is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Collection House? 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 firstname.lastname@example.org.