On 30 June 2019, St Barbara Limited (ASX:SBM) announced its earnings update. Overall, analysts seem fairly confident, as a 40% increase in profits is expected in the upcoming year, though this is relatively lower than the previous 5-year average earnings growth of 47%. With trailing-twelve-month net income at current levels of AU$144m, we should see this rise to AU$201m in 2020. Below is a brief commentary on the longer term outlook the market has for St Barbara. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 6 analysts of SBM 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. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of SBM's earnings growth over these next few years.
By 2022, SBM's earnings should reach AU$157m, from current levels of AU$144m, resulting in an annual growth rate of 2.6%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of A$0.17 in the final year of forecast compared to the current A$0.27 EPS today. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 22% to 22% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For St Barbara, I've compiled three fundamental aspects you should further research:
- Valuation: What is St Barbara 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 St Barbara is currently mispriced by the market.
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for St Barbara's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of St Barbara? 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 email@example.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.