The latest earnings announcement discoverIE Group plc (LON:DSCV) released in March 2018 indicated that the business gained from a substantial tailwind, more than doubling its earnings from the prior year. Below is a brief commentary on my key takeaways on how market analysts perceive discoverIE Group’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for the upcoming year seems buoyant, with earnings increasing by a robust 11.0%. This growth seems to continue into the following year with rates arriving at double digit 20.9% compared to today’s earnings, and finally hitting UK£16.2m by 2021.
While it is useful to be aware of the growth rate year by year relative to today’s figure, it may be more valuable evaluating the rate at which the company is growing on average every year. The pro of this approach is that we can get a better picture of the direction of discoverIE 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 inserted 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 10.2%. This means that, we can assume discoverIE Group will grow its earnings by 10.2% every year for the next few years.
For discoverIE Group, there are three key aspects you should further examine:
- 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 DSCV 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 DSCV is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DSCV? 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 firstname.lastname@example.org.