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GWA Group Limited (ASX:GWA): Immense Growth Potential?

Simply Wall St

After GWA Group Limited's (ASX:GWA) earnings announcement in December 2018, analysts seem cautiously bearish, with earnings expected to grow by 17% in the upcoming year relative to the higher past 5-year average growth rate of 20%. Presently, with latest-twelve-month earnings at AU$50m, we should see this growing to AU$59m by 2020. Below is a brief commentary on the longer term outlook the market has for GWA Group. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for GWA Group

How is GWA Group going to perform in the near future?

The 6 analysts covering GWA view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for GWA, 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.

ASX:GWA Past and Future Earnings, August 9th 2019

From the current net income level of AU$50m and the final forecast of AU$60m by 2022, the annual rate of growth for GWA’s earnings is 1.2%. EPS reaches A$0.23 in the final year of forecast compared to the current A$0.19 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 14% to 13% by the end of 2022.

Next Steps:

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