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What Should Investors Know About Lovisa Holdings Limited's (ASX:LOV) Future?

Simply Wall St

After Lovisa Holdings Limited's (ASX:LOV) earnings announcement on 30 June 2019, analyst forecasts seem fairly subdued, as a 12% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 20%. By 2020, we can expect Lovisa Holdings’s bottom line to reach AU$41m, a jump from the current trailing-twelve-month of AU$37m. Below is a brief commentary around Lovisa Holdings's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for Lovisa Holdings

How is Lovisa Holdings going to perform in the near future?

The 5 analysts covering LOV 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. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of LOV's earnings growth over these next few years.

ASX:LOV Past and Future Earnings, August 22nd 2019

From the current net income level of AU$37m and the final forecast of AU$64m by 2022, the annual rate of growth for LOV’s earnings is 18%. EPS reaches A$0.60 in the final year of forecast compared to the current A$0.35 EPS today. Margins are currently sitting at 15%, approximately the same as previous years. With analysts forecasting revenue growth of 0.75111 and LOV's net income growth expected to roughly track that, this company may add value for shareholders over time.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Lovisa Holdings, there are three key factors you should further research:

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