What Should Investors Know About Healthcare Services Group, Inc.’s (NASDAQ:HCSG) Long Term Outlook?
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The latest earnings update Healthcare Services Group, Inc. (NASDAQ:HCSG) released in December 2018 confirmed that the company endured a minor headwind with earnings deteriorating from US$88m to US$84m, a change of -5.3%. Investors may find it useful to understand how market analysts view Healthcare Services Group’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
View our latest analysis for Healthcare Services Group
Market analysts’ prospects for next year seems positive, with earnings growing by a robust 37%. This growth seems to continue into the following year with rates arriving at double digit 57% compared to today’s earnings, and finally hitting US$162m by 2022.
Even though it is helpful to be aware of the growth year by year relative to today’s value, it may be more valuable to analyze the rate at which the earnings are moving on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Healthcare Services Group’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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 20%. This means that, we can presume Healthcare Services Group will grow its earnings by 20% every year for the next few years.
Next Steps:
For Healthcare Services Group, I’ve compiled three pertinent factors 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 HCSG 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 HCSG is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HCSG? 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. On rare occasion, data errors may occur. Thank you for reading.
