Looking at Ubiquiti Networks, Inc.'s (NASDAQ:UBNT) recent earnings update on 31 March 2019, it seems that analyst forecasts are fairly bearish, with profits predicted to drop by 8.9% next year relative to the past 5-year average growth rate of 12%. With trailing-twelve-month net income at current levels of US$196m, the consensus growth rate suggests that earnings will decline to US$179m by 2020. Below is a brief commentary around Ubiquiti Networks'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.
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Exciting times ahead?
The longer term expectations from the 4 analysts of UBNT is tilted towards the negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of -0.6% based on the most recent earnings level of US$196m to the final forecast of US$192m by 2022. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $4.58 in the final year of forecast compared to the current $2.54 EPS today. The bottom-line decline seems to be caused by top-line expansion of 6.0%, which is predicted to lag cost growth leading up to 2022. Furthermore, the current 19% margin is expected to contract to 16% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Ubiquiti Networks, there are three fundamental factors you should further research:
- 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 Ubiquiti Networks 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 Ubiquiti Networks is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ubiquiti Networks? 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.