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Over the Wire Holdings Limited (ASX:OTW): Earnings Growth Remains Elusive

Simply Wall St

After Over the Wire Holdings Limited's (ASX:OTW) earnings announcement on 30 June 2019, analyst forecasts seem bearish, as a 17% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 37%. With trailing-twelve-month net income at current levels of AU$10m, the consensus growth rate suggests that earnings will decline to AU$8.4m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Over the Wire Holdings in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

View our latest analysis for Over the Wire Holdings

What can we expect from Over the Wire Holdings in the longer term?

The view from 3 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. 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:OTW Past and Future Earnings, August 16th 2019

From the current net income level of AU$10m and the final forecast of AU$13m by 2022, the annual rate of growth for OTW’s earnings is 12%. EPS reaches A$0.27 in the final year of forecast compared to the current A$0.21 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 12% to 10% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Over the Wire Holdings, there are three relevant 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 Over the Wire 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 Over the Wire Holdings is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Over the Wire 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 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.