Australia Markets closed

Will Baby Bunting Group Limited’s (ASX:BBN) Earnings Grow In The Next 12 Months?

Looking at Baby Bunting Group Limited’s (ASX:BBN) earnings update in June 2018, it seems that analyst forecasts are substantially optimistic, with profits predicted to ramp up by an impressive 54% next year, compared with the past 5-year average growth rate of 23%. Presently, with latest-twelve-month earnings at AU$9m, we should see this growing to AU$13m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for Baby Bunting Group

Exciting times ahead?

Over the next three years, it seems the consensus view of the 4 analysts covering BBN is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for BBN, 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.

ASX:BBN Future Profit October 29th 18

This results in an annual growth rate of 28% based on the most recent earnings level of AU$9m to the final forecast of AU$21m by 2021. EPS reaches A$0.16 in the final year of forecast compared to the current A$0.069 EPS today. The primary reason for earnings growth is due to cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. Margins is currently sitting at 2.9%, which is expected to expand to 4.9% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Baby Bunting Group, I’ve put together three pertinent aspects you should look at:

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