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Will Virtus Health Limited's (ASX:VRT) Earnings Grow In Next 12 Months?

Simply Wall St

As Virtus Health Limited (ASX:VRT) announced its recent earnings release on 30 June 2019, analyst forecasts seem pessimistic, with profits predicted to drop by 6.1% next year. Though this pessimism is not unfounded, given the 5-year track record of negative growth. With trailing-twelve-month net income at current levels of AU$28m, the consensus growth rate suggests that earnings will decline to AU$27m by 2020. Below is a brief commentary on the longer term outlook the market has for Virtus Health. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Virtus Health

How is Virtus Health going to perform in the near future?

The 3 analysts covering VRT view its longer term outlook with a positive 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.

ASX:VRT Past and Future Earnings, August 20th 2019

This results in an annual growth rate of 4.0% based on the most recent earnings level of AU$28m to the final forecast of AU$30m by 2022. EPS reaches A$0.36 in the final year of forecast compared to the current A$0.35 EPS today. However, the near term margins may change heading into 2022, from the current levels of 9.8% to 9.7%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Virtus Health, I've compiled three pertinent aspects you should further research:

  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 Virtus Health 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 Virtus Health is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Virtus Health? 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.