On 30 June 2019, Redrow plc (LON:RDW) released its earnings update. Generally, the consensus outlook from analysts appear somewhat bearish, with earnings expected to grow by 1.8% in the upcoming year compared with the higher past 5-year average growth rate of 20%. Currently with trailing-twelve-month earnings of UK£329m, we can expect this to reach UK£335m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Redrow in the longer term?
The view from 12 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 understand the overall trajectory of RDW's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 2.5% based on the most recent earnings level of UK£329m to the final forecast of UK£356m by 2022. EPS reaches £1.0 in the final year of forecast compared to the current £0.92 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 16% to 15% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Redrow, there are three relevant 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 Redrow 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 Redrow is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Redrow? 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 firstname.lastname@example.org. 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.