In March 2018, discoverIE Group plc (LON:DSCV) announced its earnings update. Overall, analysts seem cautiously bearish, as a 5.5% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 26%. By 2019, we can expect discoverIE Group’s bottom line to reach UK£12m, a jump from the current trailing-twelve-month UK£12m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for discoverIE Group in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Can we expect discoverIE Group to keep growing?
The longer term expectations from the 4 analysts of DSCV is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for DSCV, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
This results in an annual growth rate of 10% based on the most recent earnings level of UK£12m to the final forecast of UK£16m by 2021. This leads to an EPS of £0.21 in the final year of projections relative to the current EPS of £0.17. Earnings growth appears to be a result of cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, DSCV’s profit margin will have expanded from 3.0% to 3.5%.
Future outlook is only one aspect when you’re building an investment case for a stock. For discoverIE Group, there are three fundamental factors 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 discoverIE Group 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 discoverIE Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of discoverIE Group? 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.