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Polypipe Group plc (LON:PLP): Will The Growth Last?

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After Polypipe Group plc's (LON:PLP) earnings announcement in December 2018, it seems that analyst expectations are fairly bearish, as a 17% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 23%. By 2020, we can expect Polypipe Group’s bottom line to reach UK£57m, a jump from the current trailing-twelve-month of UK£49m. Below is a brief commentary around Polypipe Group's earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Polypipe Group

What can we expect from Polypipe Group in the longer term?

Longer term expectations from the 7 analysts covering PLP’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for PLP, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

LSE:PLP Past and Future Earnings, July 16th 2019
LSE:PLP Past and Future Earnings, July 16th 2019

This results in an annual growth rate of 8.6% based on the most recent earnings level of UK£49m to the final forecast of UK£65m by 2022. This leads to an EPS of £0.33 in the final year of projections relative to the current EPS of £0.25. Margins are currently sitting at 11%, which is expected to expand to 13% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Polypipe Group, I've compiled three key factors 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 Polypipe Group 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 Polypipe Group is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Polypipe Group? 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.