In February 2018, First Derivatives plc (LON:FDP) announced its earnings update. Overall, analysts seem fairly confident, as a 35.4% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of 8.6%. Currently with trailing-twelve-month earnings of UK£10.2m, we can expect this to reach UK£13.8m 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.
What can we expect from First Derivatives in the longer term?
Longer term expectations from the 5 analysts covering FDP’s stock is one of 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.
From the current net income level of UK£10.2m and the final forecast of UK£18.1m by 2021, the annual rate of growth for FDP’s earnings is 16.3%. This leads to an EPS of £0.51 in the final year of projections relative to the current EPS of £0.40. The main reason for growth is a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, FDP’s profit margin will have expanded from 5.5% to 6.9%.
Future outlook is only one aspect when you’re building an investment case for a stock. For First Derivatives, I’ve compiled three relevant aspects you should further research:
- 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 First Derivatives 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 First Derivatives is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of First Derivatives? 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 firstname.lastname@example.org.