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Senetas Corporation Limited’s (ASX:SEN) latest earnings update in June 2018 indicated that the company faced a significant headwind with earnings deteriorating by -32%. Today I want to provide a brief commentary on how market analysts predict Senetas’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for the upcoming year seems optimistic, with earnings rising by a significant 64%. This strong growth in earnings is expected to continue, bringing the bottom line up to AU$6.9m by 2022.
While it is informative knowing the rate of growth each year relative to today’s figure, it may be more beneficial determining the rate at which the earnings are rising or falling on average every year. The pro of this approach is that it ignores near term flucuations and accounts for the overarching direction of Senetas’s earnings trajectory over time, which may be more relevant for long term investors. To calculate 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 39%. This means, we can presume Senetas will grow its earnings by 39% every year for the next couple of years.
For Senetas, there are three essential aspects 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 SEN 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 SEN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SEN? 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 email@example.com.