On 30 June 2019, Silverlake Axis Ltd (SGX:5CP) released its most recent earnings update. Generally, analyst consensus outlook seem pessimistic, with earnings expected to decline by 10% in the upcoming year relative to the past 5-year average growth rate of 0.7%. Presently, with latest-twelve-month earnings at RM246m, we should see this fall to RM220m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
What can we expect from Silverlake Axis in the longer term?
The longer term view from the 3 analysts covering 5CP 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 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 RM246m and the final forecast of RM243m by 2022, the annual rate of growth for 5CP’s earnings is 0.05%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of MYR0.091 in the final year of forecast compared to the current MYR0.093 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 36% to 30% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Silverlake Axis, I've compiled three key factors you should look at:
- 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 Silverlake Axis 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 Silverlake Axis is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Silverlake Axis? 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 firstname.lastname@example.org. 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.