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Mitie Group plc (LON:MTO): Will The Growth Last?

Simply Wall St

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In June 2019, Mitie Group plc (LON:MTO) announced its most recent earnings update, which revealed that the business turned profitable again after experiencing negative earnings in the last financial year. Below is my commentary, albeit very simple and high-level, on how market analysts predict Mitie Group's earnings growth trajectory over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

See our latest analysis for Mitie Group

Analysts' outlook for the coming year seems optimistic, with earnings rising by a significant 60%. This strong growth in earnings is expected to continue, bringing the bottom line up to UK£74m by 2022.

LSE:MTO Past and Future Earnings, June 22nd 2019

Even though it is useful to understand the rate of growth year by year relative to today’s level, it may be more beneficial to gauge the rate at which the company is moving on average every year. The benefit of this approach is that we can get a bigger picture of the direction of Mitie Group's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 28%. This means, we can expect Mitie Group will grow its earnings by 28% every year for the next few years.

Next Steps:

For Mitie Group, I've put together three important aspects 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 MTO 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 MTO is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MTO? 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.