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Ricardo plc (LON:RCDO): What We Can Expect From This Growth Stock

Simply Wall St

After Ricardo plc's (LON:RCDO) earnings announcement on 30 June 2019, it seems that analyst forecasts are fairly optimistic, with earnings expected to grow by 48% in the upcoming year compared with the past 5-year average growth rate of 0.4%. By 2020, we can expect Ricardo’s bottom line to reach UK£29m, a jump from the current trailing-twelve-month of UK£20m. Below is a brief commentary around Ricardo's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Ricardo

How is Ricardo going to perform in the near future?

The 6 analysts covering RCDO view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

LSE:RCDO Past and Future Earnings, September 14th 2019

By 2022, RCDO's earnings should reach UK£33m, from current levels of UK£20m, resulting in an annual growth rate of 18%. EPS reaches £0.59 in the final year of forecast compared to the current £0.37 EPS today. Margins are currently sitting at 5.2%, which is expected to expand to 7.6% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Ricardo, there are three key factors you should look at:

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