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Reckon Limited (ASX:RKN): Are Analysts Bullish?

Simply Wall St

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Reckon Limited's (ASX:RKN) most recent earnings update in December 2018 suggested that the business gained from a slight tailwind, leading to a single-digit earnings growth of 3.2%. Below is a brief commentary on my key takeaways on how market analysts predict Reckon's earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Reckon

Analysts' outlook for next year seems positive, with earnings increasing by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 15% compared to today’s earnings, and finally hitting AU$9.2m by 2022.

ASX:RKN Past and Future Earnings, May 29th 2019

Even though it is informative understanding the growth year by year relative to today’s figure, it may be more beneficial evaluating the rate at which the company is growing on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Reckon's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've inserted 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 5.7%. This means, we can anticipate Reckon will grow its earnings by 5.7% every year for the next couple of years.

Next Steps:

For Reckon, I've compiled three relevant factors you should further research:

  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 RKN 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 RKN is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RKN? 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.