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Reckon Limited (ASX:RKN): Will The Growth Last?

Simply Wall St

On 31 December 2018, Reckon Limited (ASX:RKN) announced its earnings update. Overall, it seems that analyst forecasts are fairly optimistic, as a 13% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of -29%. By 2020, we can expect Reckon’s bottom line to reach AU$8.7m, a jump from the current trailing-twelve-month of AU$7.7m. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Reckon in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Reckon

Exciting times ahead?

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 get an idea of the overall earnings growth trend for RKN, 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.

ASX:RKN Past and Future Earnings, April 16th 2019

By 2022, RKN's earnings should reach AU$9.6m, from current levels of AU$7.7m, resulting in an annual growth rate of 6.9%. This leads to an EPS of A$0.084 in the final year of projections relative to the current EPS of A$0.068. In 2022, RKN's profit margin will have expanded from 10% to 13%.

Next Steps:

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