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Over the Wire Holdings Limited (ASX:OTW): What Does The Future Look Like?

Simply Wall St

Over the Wire Holdings Limited's (ASX:OTW) released its most recent earnings update in August 2019, which signalled that the business gained from a large tailwind, eventuating to a high double-digit earnings growth of 83%. Investors may find it useful to understand how market analysts perceive Over the Wire Holdings's earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

View our latest analysis for Over the Wire Holdings

Market analysts' prospects for the coming year seems pessimistic, with earnings falling by a double-digit -18%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to AU$13m in 2022.

ASX:OTW Past and Future Earnings, August 30th 2019

Even though it’s useful to be aware of the growth year by year relative to today’s level, it may be more insightful gauging the rate at which the earnings are moving every year, on average. The pro of this technique is that we can get a bigger picture of the direction of Over the Wire Holdings'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've appended 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 12%. This means that, we can presume Over the Wire Holdings will grow its earnings by 12% every year for the next few years.

Next Steps:

For Over the Wire Holdings, I've compiled three essential 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 OTW 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 OTW is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OTW? 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.