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Southern Cross Electrical Engineering Limited (ASX:SXE): Should The Future Outlook Worry You?

Simply Wall St

As Southern Cross Electrical Engineering Limited (ASX:SXE) released its latest earnings announcement on 30 June 2019, analyst forecasts appear to be bearish, with profits predicted to drop by 0.9% next year against the past 5-year average growth rate of 39%. With trailing-twelve-month net income at current levels of AU$13m, the consensus growth rate suggests that earnings will decline to AU$13m by 2020. Below is a brief commentary around Southern Cross Electrical Engineering'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.

View our latest analysis for Southern Cross Electrical Engineering

Can we expect Southern Cross Electrical Engineering to keep growing?

The 1 analysts covering SXE 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 understand the overall trajectory of SXE'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.

ASX:SXE Past and Future Earnings, August 29th 2019

From the current net income level of AU$13m and the final forecast of AU$14m by 2022, the annual rate of growth for SXE’s earnings is 3.7%. EPS reaches A$0.060 in the final year of forecast compared to the current A$0.054 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 3.3% to 3.1% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Southern Cross Electrical Engineering, I've put together three fundamental factors you should further examine:

  1. Valuation: What is Southern Cross Electrical Engineering 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 Southern Cross Electrical Engineering is currently mispriced by the market.
  2. Future Earnings: How does Southern Cross Electrical Engineering's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Southern Cross Electrical Engineering? 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.