What Should You Know About SThree plc’s (LON:STHR) Future?
Based on SThree plc’s (LSE:STHR) earnings update in November 2017, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 3.78% in the upcoming year compared with the higher past 5-year average growth rate of 11.16%. By 2019, we can expect SThree’s bottom line to reach £28.7M, a jump from the current £27.6M. Below is a brief commentary around SThree’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here. See our latest analysis for SThree
How will SThree perform in the near future?
The 6 analysts covering STHR view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of 19.52% based on the most recent earnings level of £27.6M to the final forecast of £47.6M by 2021. EPS reaches £0.36 in the final year of forecast compared to the current £0.21 EPS today. The main reason for growth is a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. With a current profit margin of 2.48%, this movement will result in a margin of 3.47% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For SThree, there are three fundamental factors you should look at:
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 SThree 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 SThree is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SThree? 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 pass 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.
