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Johnson Service Group PLC (LON:JSG): Poised For Long-Term Success?

Simply Wall St

Johnson Service Group PLC's (LON:JSG) announced its latest earnings update in March 2019, which indicated that the company benefited from a small tailwind, leading to a single-digit earnings growth of 5.5%. Below is a brief commentary on my key takeaways on how market analysts predict Johnson Service Group's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

See our latest analysis for Johnson Service Group

Analysts' outlook for the upcoming year seems buoyant, with earnings growing by a robust 12%. This growth seems to continue into the following year with rates arriving at double digit 18% compared to today’s earnings, and finally hitting UK£34m by 2022.

AIM:JSG Past and Future Earnings, August 10th 2019

Although it’s helpful to understand the growth year by year relative to today’s figure, it may be more beneficial to determine the rate at which the earnings are growing every year, on average. The pro of this technique is that we can get a better picture of the direction of Johnson Service Group's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.6%. This means that, we can anticipate Johnson Service Group will grow its earnings by 7.6% every year for the next few years.

Next Steps:

For Johnson Service Group, I've compiled three pertinent aspects 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 JSG 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 JSG is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of JSG? 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.