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Technology One Limited (ASX:TNE): Poised For Long Term Success?

As Technology One Limited (ASX:TNE) released its earnings announcement on 30 September 2018, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 16% next year relative to the past 5-year average growth rate of 12%. With trailing-twelve-month net income at current levels of AU$51m, we should see this rise to AU$59m in 2019. Below is a brief commentary on the longer term outlook the market has for Technology One. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Technology One

Can we expect Technology One to keep growing?

The view from 7 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. 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 TNE’s earnings growth over these next few years.

ASX:TNE Future Profit December 13th 18

This results in an annual growth rate of 14% based on the most recent earnings level of AU$51m to the final forecast of AU$79m by 2021. EPS reaches A$0.25 in the final year of forecast compared to the current A$0.16 EPS today. Margins are currently sitting at 17%, which is expected to expand to 20% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Technology One, I’ve compiled three important aspects you should further examine:

  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 Technology One 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 Technology One is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Technology One? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.