The most recent earnings release Auto Trader Group plc’s (LON:AUTO) announced in March 2018 confirmed that the company experienced a strong tailwind, leading to a double-digit earnings growth of 10.7%. Below, I’ve laid out key growth figures on how market analysts perceive Auto Trader Group’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for the coming year seems rather subdued, with earnings climbing by a single digit 6.5%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 16.7% compared to today’s earnings, and finally hitting UK£217.5m by 2021.
Although it is useful to be aware of the growth rate year by year relative to today’s figure, it may be more insightful estimating the rate at which the business is rising or falling every year, on average. The advantage of this method is that it ignores near term flucuations and accounts for the overarching direction of Auto Trader Group’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put 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 8.1%. This means, we can presume Auto Trader Group will grow its earnings by 8.1% every year for the next couple of years.
For Auto Trader Group, 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 AUTO 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 AUTO is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AUTO? 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 firstname.lastname@example.org.