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dotDigital Group Plc (LON:DOTD): Will The Growth Last?

Sadie Atkinson

dotDigital Group Plc’s (LON:DOTD) latest earnings update in June 2018 showed that the company benefited from a strong tailwind, eventuating to a double-digit earnings growth of 20%. Below, I’ve presented key growth figures on how market analysts predict dotDigital Group’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

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Analysts’ expectations for next year seems buoyant, with earnings rising by a robust 27%. This growth seems to continue into the following year with rates reaching double digit 44% compared to today’s earnings, and finally hitting UK£13m by 2022.

AIM:DOTD Future Profit January 14th 19

While it’s useful to be aware of the growth rate each year relative to today’s value, it may be more valuable gauging the rate at which the earnings are rising or falling on average every year. The advantage of this technique is that we can get a better picture of the direction of dotDigital Group’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 14%. This means that, we can presume dotDigital Group will grow its earnings by 14% every year for the next few years.

Next Steps:

For dotDigital Group, there are 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 DOTD 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 DOTD is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DOTD? 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.