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What Should We Expect From AA plc's (LON:AA.) Earnings In The Next 12 Months?

Simply Wall St

In January 2019, AA plc (LON:AA.) released its earnings update. Generally, analysts seem highly optimistic, with profits predicted to ramp up by an impressive 81% next year, relative to the past 5-year average growth rate of -1.0%. With trailing-twelve-month net income at current levels of UK£42m, we should see this rise to UK£76m in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for AA

How will AA perform in the near future?

The longer term view from the 5 analysts covering AA. is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for AA., 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.

LSE:AA. Past and Future Earnings, August 19th 2019

From the current net income level of UK£42m and the final forecast of UK£101m by 2022, the annual rate of growth for AA.’s earnings is 18%. This leads to an EPS of £0.16 in the final year of projections relative to the current EPS of £0.069. In 2022, AA.'s profit margin will have expanded from 4.3% to 9.9%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For AA, 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 AA 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 AA is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of AA? 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.