Computershare Limited’s (ASX:CPU) announced its latest earnings update in June 2018, which signalled that the business benefited from a robust tailwind, eventuating to a double-digit earnings growth of 13%. Below, I’ve laid out key numbers on how market analysts predict Computershare’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ prospects for the upcoming year seems optimistic, with earnings growing by a robust 15%. This growth seems to continue into the following year with rates reaching double digit 20% compared to today’s earnings, and finally hitting US$405m by 2021.
Even though it is helpful to understand the growth rate year by year relative to today’s figure, it may be more beneficial gauging the rate at which the company is rising or falling every year, on average. The advantage of this method is that we can get a bigger picture of the direction of Computershare’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 8.7%. This means that, we can presume Computershare will grow its earnings by 8.7% every year for the next few years.
For Computershare, I’ve put together three essential 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 CPU 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 CPU is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CPU? 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.