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Will McMillan Shakespeare Limited's (ASX:MMS) Earnings Grow In The Next 12 Months?

Simply Wall St

Based on McMillan Shakespeare Limited's (ASX:MMS) earnings update on 30 June 2019, analysts seem cautiously optimistic, as a 45% increase in profits is expected in the upcoming year, against the past 5-year average growth rate of -4.0%. By 2020, we can expect McMillan Shakespeare’s bottom line to reach AU$92m, a jump from the current trailing-twelve-month of AU$64m. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for McMillan Shakespeare in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for McMillan Shakespeare

Exciting times ahead?

The view from 5 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of MMS's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

ASX:MMS Past and Future Earnings, August 22nd 2019

From the current net income level of AU$64m and the final forecast of AU$109m by 2022, the annual rate of growth for MMS’s earnings is 18%. EPS reaches A$1.47 in the final year of forecast compared to the current A$0.77 EPS today. Margins are currently sitting at 12%, which is expected to expand to 18% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For McMillan Shakespeare, I've compiled three key aspects 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 McMillan Shakespeare 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 McMillan Shakespeare is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of McMillan Shakespeare? 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.