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Elementis plc (LON:ELM): What Are The Future Prospects?

Based on Elementis plc’s (LON:ELM) earnings update on 31 December 2018, the consensus outlook from analysts appear highly confident, with earnings expected to grow by a high double-digit of 91% in the upcoming year, against the historical 5-year average growth rate of -13%. Currently with trailing-twelve-month earnings of US$50m, we can expect this to reach US$95m by 2020. Below is a brief commentary around Elementis’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Elementis

How will Elementis perform in the near future?

The longer term view from the 8 analysts covering ELM is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for ELM, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

LSE:ELM Past and Future Earnings, March 7th 2019
LSE:ELM Past and Future Earnings, March 7th 2019

From the current net income level of US$50m and the final forecast of US$115m by 2022, the annual rate of growth for ELM’s earnings is 29%. EPS reaches $0.20 in the final year of forecast compared to the current $0.096 EPS today. Margins are currently sitting at 6.1%, which is expected to expand to 11% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Elementis, there are three fundamental factors you should further examine:

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  1. 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.

  2. Valuation: What is Elementis 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 Elementis is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Elementis? 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.