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Lycopodium Limited (ASX:LYL): Is It A Smart Long Term Opportunity?

Simply Wall St

After Lycopodium Limited's (ASX:LYL) earnings announcement on 30 June 2019, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 2.7% in the upcoming year relative to the higher past 5-year average growth rate of 54%. With trailing-twelve-month net income at current levels of AU$17m, we should see this rise to AU$17m in 2020. Below is a brief commentary around Lycopodium'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 Lycopodium

How will Lycopodium perform in the near future?

The 3 analysts covering LYL 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.

ASX:LYL Past and Future Earnings, September 9th 2019

This results in an annual growth rate of 6.8% based on the most recent earnings level of AU$17m to the final forecast of AU$19m by 2022. EPS reaches A$0.47 in the final year of forecast compared to the current A$0.42 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 11% to 9.7% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Lycopodium, I've compiled three key factors you should further examine:

  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 Lycopodium 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 Lycopodium is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lycopodium? 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.