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What Should We Expect From Pacific Smiles Group Limited's (ASX:PSQ) Earnings Over The Next Year?

Simply Wall St

After Pacific Smiles Group Limited's (ASX:PSQ) earnings announcement on 30 June 2019, analysts seem cautiously optimistic, as a 9.6% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of -0.7%. With trailing-twelve-month net income at current levels of AU$8.6m, we should see this rise to AU$9.4m in 2020. Below is a brief commentary on the longer term outlook the market has for Pacific Smiles Group. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Pacific Smiles Group

How is Pacific Smiles Group going to perform in the near future?

The longer term expectations from the 3 analysts of PSQ is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of PSQ's earnings growth over these next few years.

ASX:PSQ Past and Future Earnings, August 23rd 2019

This results in an annual growth rate of 9.5% based on the most recent earnings level of AU$8.6m to the final forecast of AU$11m by 2022. This leads to an EPS of A$0.072 in the final year of projections relative to the current EPS of A$0.056. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 6.9% to 6.3% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Pacific Smiles Group, I've compiled three pertinent factors you should further research:

  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 Pacific Smiles 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 Pacific Smiles Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Pacific Smiles 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!

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.