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Front Yard Residential Corporation (NYSE:RESI): What Can We Expect From This High Growth Stock?

Simply Wall St

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In December 2018, Front Yard Residential Corporation (NYSE:RESI) released its most recent earnings announcement, which signalled that losses became smaller relative to the prior year's level - great news for investors Below is a brief commentary on my key takeaways on how market analysts predict Front Yard Residential's earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Front Yard Residential

Market analysts' prospects for next year seems positive, with earnings becoming less negative, reaching -US$74.6m in 2020. However, earnings are expected to fall off and stay relatively flat over the next few years, arriving at -US$59.7m in 2022.

NYSE:RESI Past and Future Earnings, May 8th 2019

Even though it’s useful to understand the growth each year relative to today’s figure, it may be more valuable to gauge the rate at which the earnings are growing every year, on average. The advantage of this approach is that it ignores near term flucuations and accounts for the overarching direction of Front Yard Residential's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put 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 33%. This means, we can presume Front Yard Residential will grow its earnings by 33% every year for the next few years.

Next Steps:

For Front Yard Residential, there are three essential aspects you should further examine:

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