On 30 June 2019, IPH Limited (ASX:IPH) released its earnings update. Generally, analysts seem fairly confident, with profits predicted to increase by 36% next year compared with the past 5-year average growth rate of 9.9%. With trailing-twelve-month net income at current levels of AU$53m, we should see this rise to AU$72m in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Exciting times ahead?
Longer term expectations from the 5 analysts covering IPH’s stock 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 IPH's earnings growth over these next few years.
This results in an annual growth rate of 15% based on the most recent earnings level of AU$53m to the final forecast of AU$87m by 2022. This leads to an EPS of A$0.46 in the final year of projections relative to the current EPS of A$0.27. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 21% to 20% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For IPH, there are three essential aspects 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 IPH 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 IPH is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of IPH? 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.