Yahoo Finance AA plc (LON:AA.): Immense Growth Potential?
In May 2019, AA plc (LON:AA.) announced its latest earnings update, which suggested that the business endured a substantial headwind with earnings declining by -62%. Below is a brief commentary on my key takeaways on how market analysts perceive AA's earnings growth outlook over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
View our latest analysis for AA
Analysts' expectations for the upcoming year seems positive, with earnings expanding by a significant 81%. This high growth in earnings is expected to continue, bringing the bottom line up to UK£101m by 2022.
While it is useful to be aware of the growth rate year by year relative to today’s level, it may be more insightful to analyze the rate at which the company is rising or falling every year, on average. The pro of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of AA's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've appended 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 18%. This means that, we can expect AA will grow its earnings by 18% every year for the next few years.
Next Steps:
For AA, there are three key aspects you should further examine:
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 AA. 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 AA. is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AA.? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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