The latest earnings update Alfa Financial Software Holdings PLC (LON:ALFA) released in December 2018 showed that the business experienced a substantial headwind with earnings falling by -30%. Below is a brief commentary on my key takeaways on how market analysts perceive Alfa Financial Software Holdings's earnings growth trajectory over the next couple of 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.
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Analysts' outlook for the upcoming year seems rather subdued, with earnings expanding by a single digit 4.1%. The growth outlook in the following year seems much more positive with rates arriving at double digit 14% compared to today’s earnings, and finally hitting UK£23m by 2022.
Even though it is useful to be aware of the growth rate each year relative to today’s level, it may be more beneficial determining the rate at which the company is rising or falling on average every year. The pro of this approach is that we can get a bigger picture of the direction of Alfa Financial Software Holdings's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 6.0%. This means that, we can anticipate Alfa Financial Software Holdings will grow its earnings by 6.0% every year for the next few years.
For Alfa Financial Software Holdings, I've compiled three key 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 ALFA 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 ALFA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALFA? 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.
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