Based on Service Stream Limited's (ASX:SSM) earnings update on 30 June 2019, analyst consensus outlook appear cautiously subdued, with earnings expected to grow by 18% in the upcoming year relative to the higher past 5-year average growth rate of 38%. Presently, with latest-twelve-month earnings at AU$50m, we should see this growing to AU$59m 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.
Exciting times ahead?
Longer term expectations from the 4 analysts covering SSM’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for SSM, 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.
From the current net income level of AU$50m and the final forecast of AU$58m by 2022, the annual rate of growth for SSM’s earnings is 7.9%. EPS reaches A$0.14 in the final year of forecast compared to the current A$0.13 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 5.9% to 5.6% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Service Stream, there are three pertinent aspects you should look at:
- 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 Service Stream 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 Service Stream is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Service Stream? 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.