In August 2019, Mitchell Services Limited (ASX:MSV) released its most recent earnings announcement, which confirmed that the business finally turned profitable after delivering losses on average over the past few years. Below, I've laid out key numbers on how market analysts predict Mitchell Services's earnings growth outlook over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts' prospects for the coming year seems pessimistic, with earnings falling by a double-digit -12%. However, the next few years show a contrast, with earnings growth becoming positive in 2021, with the bottom line increasing to AU$18m in 2022.
Although it’s helpful to be aware of the rate of growth each year relative to today’s figure, it may be more insightful estimating the rate at which the company is rising or falling every year, on average. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Mitchell Services's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I've inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 3.1%. This means, we can assume Mitchell Services will grow its earnings by 3.1% every year for the next few years.
For Mitchell Services, I've compiled three essential factors you should look at:
- 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 MSV 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 MSV is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MSV? 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 email@example.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.