As MotorCycle Holdings Limited (ASX:MTO) announced its recent earnings release on 30 June 2019, analyst forecasts appear to be pessimistic, as a 5.3% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 19%. With trailing-twelve-month net income at current levels of AU$8.3m, the consensus growth rate suggests that earnings will decline to AU$7.9m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Can we expect MotorCycle Holdings to keep growing?
The longer term view from the 2 analysts covering MTO 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. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of MTO's earnings growth over these next few years.
By 2022, MTO's earnings should reach AU$11m, from current levels of AU$8.3m, resulting in an annual growth rate of 12%. EPS reaches A$0.18 in the final year of forecast compared to the current A$0.14 EPS today. In 2022, MTO's profit margin will have expanded from 2.5% to 2.9%.
Future outlook is only one aspect when you're building an investment case for a stock. For MotorCycle Holdings, I've compiled three essential aspects 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 MotorCycle Holdings 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 MotorCycle Holdings is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of MotorCycle Holdings? 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 firstname.lastname@example.org. 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.