Looking at Hollywood Bowl Group plc’s (LON:BOWL) earnings update in March 2018, the consensus outlook from analysts appear pessimistic, with profits predicted to drop by -4.8% next year relative to the past 5-year average growth rate of 41%. With trailing-twelve-month net income at current levels of UK£20m, the consensus growth rate suggests that earnings will decline to UK£19m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How will Hollywood Bowl Group perform in the near future?
The 6 analysts covering BOWL view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of 6.8% based on the most recent earnings level of UK£18m to the final forecast of UK£21m by 2021. EPS reaches £0.14 in the final year of forecast compared to the current £0.12 EPS today. The primary reason for earnings growth is due to cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. However, the expansion of the current 16% margin is not expected to be sustained, as it begins to contract to 16% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Hollywood Bowl Group, I’ve compiled three essential factors you should further examine:
- 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 Hollywood Bowl 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 Hollywood Bowl Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Hollywood Bowl 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 email@example.com.