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What Do Investors Need To Know About The Future Of Australian Finance Group Limited’s (ASX:AFG)?

Alexis Guardo

Since Australian Finance Group Limited (ASX:AFG) released its earnings in June 2018, analyst forecasts seem bearish, with earnings expected to decline by -3.8% in the upcoming year relative to the past 5-year average growth rate of 23%. Presently, with latest-twelve-month earnings at AU$33m, we should see this fall to AU$32m by 2020. Below is a brief commentary on the longer term outlook the market has for Australian Finance Group. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Australian Finance Group

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How is Australian Finance Group going to perform in the near future?

Longer term expectations from the 3 analysts covering AFG’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of AFG’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

ASX:AFG Future Profit January 16th 19

From the current net income level of AU$33m and the final forecast of AU$42m by 2022, the annual rate of growth for AFG’s earnings is 7.8%. EPS reaches A$0.19 in the final year of forecast compared to the current A$0.16 EPS today. Margins are currently sitting at 5.5%, which is expected to expand to 5.7% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Australian Finance Group, I’ve compiled three pertinent 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 Australian Finance 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 Australian Finance Group is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Australian Finance 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 editorial-team@simplywallst.com.