The most recent earnings release Pacific Smiles Group Limited's (ASX:PSQ) announced in August 2019 revealed that the business benefited from a strong tailwind, eventuating to a double-digit earnings growth of 30%. Below is a brief commentary on my key takeaways on how market analysts view Pacific Smiles Group's earnings growth outlook over the next couple of 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.
Market analysts' consensus outlook for next year seems buoyant, with earnings growing by a robust 14%. This growth seems to continue into the following year with rates arriving at double digit 28% compared to today’s earnings, and finally hitting AU$12m by 2022.
While it is informative understanding the growth rate year by year relative to today’s value, it may be more beneficial to determine the rate at which the company is growing on average every year. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Pacific Smiles Group's earnings trajectory over time, which may be more relevant for long term investors. To compute 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 11%. This means that, we can presume Pacific Smiles Group will grow its earnings by 11% every year for the next few years.
For Pacific Smiles Group, I've put together three pertinent aspects you should further research:
- 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 PSQ 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 PSQ is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PSQ? 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.