Looking at Stockland’s (ASX:SGP) earnings update in June 2018, it seems that analyst forecasts are fairly bearish, with earnings expected to decline by -14.4% in the upcoming year relative to the past 5-year average growth rate of 18.8%. With trailing-twelve-month net income at current levels of AU$1.03b, the consensus growth rate suggests that earnings will decline to AU$877.0m by 2019. Below is a brief commentary around Stockland’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The longer term view from the 10 analysts covering SGP is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around 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 SGP’s earnings growth over these next few years.
By 2021, SGP’s earnings should reach AU$961.9m, from current levels of AU$1.03b, resulting in an annual growth rate of -1.3%. This leads to an EPS of A$0.36 in the final year of projections relative to the current EPS of A$0.42. The primary reason for earnings contraction is due to cost growth exceeding top-line growth of 2.7% in the next three years. With this high cost growth, margins is expected to contract from 36.6% to 31.5% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Stockland, there are three pertinent factors 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 Stockland 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 Stockland is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Stockland? 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.