In September 2018, Topps Tiles Plc (LON:TPT) announced its most recent earnings update, which confirmed that the business endured a immense headwind with earnings deteriorating by -28%. Below, I’ve presented key growth figures on how market analysts perceive Topps Tiles’s earnings growth trajectory over the next couple of years and whether the future looks brighter. 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’ outlook for the upcoming year seems optimistic, with earnings rising by a robust 33%. This growth seems to continue into the following year with rates arriving at double digit 41% compared to today’s earnings, and finally hitting UK£14m by 2021.
Although it’s useful to understand the growth year by year relative to today’s level, it may be more insightful to determine the rate at which the company is moving on average every year. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Topps Tiles’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 11%. This means, we can presume Topps Tiles will grow its earnings by 11% every year for the next couple of years.
For Topps Tiles, I’ve put together three pertinent 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 TPT 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 TPT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TPT? 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.