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Will Smartgroup Corporation Ltd's (ASX:SIQ) Earnings Grow In The Next 12 Months?

Simply Wall St

In December 2018, Smartgroup Corporation Ltd (ASX:SIQ) announced its earnings update. Overall, it seems that analyst expectations are fairly bearish, as a 15% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 50%. By 2020, we can expect Smartgroup’s bottom line to reach AU$68m, a jump from the current trailing-twelve-month of AU$59m. Below is a brief commentary on the longer term outlook the market has for Smartgroup. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Smartgroup

What can we expect from Smartgroup in the longer term?

The longer term expectations from the 5 analysts of SIQ is tilted towards the 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 get an idea of the overall earnings growth trend for SIQ, 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:SIQ Past and Future Earnings, August 15th 2019

By 2022, SIQ's earnings should reach AU$83m, from current levels of AU$59m, resulting in an annual growth rate of 11%. This leads to an EPS of A$0.63 in the final year of projections relative to the current EPS of A$0.47. With a current profit margin of 24%, this movement will result in a margin of 30% by 2022.

Next Steps:

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