Since Safestore Holdings plc (LON:SAFE) released its earnings in April 2018, analyst consensus outlook appear bearish, with earnings expected to decline by -2.8% in the upcoming year relative to the past 5-year average growth rate of 21.0%. Presently, with latest-twelve-month earnings at UK£104.0m, we should see this fall to UK£101.0m by 2019. Below is a brief commentary on the longer term outlook the market has for Safestore Holdings. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is Safestore Holdings going to perform in the near future?
The view from 7 analysts over the next three years is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around 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 SAFE’s earnings growth over these next few years.
By 2021, SAFE’s earnings should reach UK£85.9m, from current levels of UK£78.3m, resulting in an annual growth rate of -0.4%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of £0.54 in the final year of forecast compared to the current £0.37 EPS today. The main reason for SAFE’s earnings contraction is cost growth exceeding top-line growth of 5.4% in the next three years. With this high cost growth, margins is expected to contract from 60.3% to 55.5% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Safestore Holdings, I’ve put together three important 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 Safestore 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 Safestore Holdings is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Safestore 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!
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 email@example.com.