The most recent earnings release OFX Group Limited's (ASX:OFX) announced in May 2019 indicated that the business endured a slight headwind with earnings falling from AU$19m to AU$18m, a change of -5.8%. Below is my commentary, albeit very simple and high-level, on how market analysts view OFX 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.
Market analysts' prospects for next year seems positive, with earnings increasing by a robust 23%. This growth seems to continue into the following year with rates arriving at double digit 33% compared to today’s earnings, and finally hitting AU$28m by 2022.
Although it is helpful to understand the growth rate year by year relative to today’s value, it may be more valuable to gauge the rate at which the earnings are moving every year, on average. The benefit of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of OFX Group's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've inserted 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 14%. This means, we can assume OFX Group will grow its earnings by 14% every year for the next few years.
For OFX Group, I've compiled three essential aspects you should further research:
- Valuation: What is OFX 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 OFX is currently mispriced by the market.
- Future Earnings: How does OFX's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OFX? 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 email@example.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.