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Will dotDigital Group Plc’s (LON:DOTD) Earnings Grow Over The Next Year?

On 30 June 2018, dotDigital Group Plc (LON:DOTD) announced its earnings update. Overall, the consensus outlook from analysts appear fairly confident, with earnings expected to grow by 27% in the upcoming year against the past 5-year average growth rate of 19%. Currently with trailing-twelve-month earnings of UK£9m, we can expect this to reach UK£11m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for dotDigital Group in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

View our latest analysis for dotDigital Group

Can we expect dotDigital Group to keep growing?

Over the next three years, it seems the consensus view of the 4 analysts covering DOTD is skewed towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for DOTD, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

AIM:DOTD Future Profit October 19th 18

From the current net income level of UK£9m and the final forecast of UK£13m by 2021, the annual rate of growth for DOTD’s earnings is 14%. EPS reaches £0.045 in the final year of forecast compared to the current £0.029 EPS today. The primary reason for earnings growth is due to revenue expansion of 17% exceeeding cost growth over time. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 20% to 18% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For dotDigital Group, I’ve put together three essential aspects you should further examine:

  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 dotDigital 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 dotDigital Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of dotDigital 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 editorial-team@simplywallst.com.