What Should Investors Know About Dignity plc’s (LON:DTY) Growth?

After Dignity plc’s (LON:DTY) earnings announcement on 28 December 2018, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 7.9% in the upcoming year compared with the higher past 5-year average growth rate of 25%. Presently, with latest-twelve-month earnings at UK£32m, we should see this growing to UK£34m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Dignity in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Dignity

Can we expect Dignity to keep growing?

The longer term view from the 4 analysts covering DTY is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

LSE:DTY Past and Future Earnings, March 15th 2019

By 2022, DTY’s earnings should reach UK£37m, from current levels of UK£32m, resulting in an annual growth rate of 4.9%. This leads to an EPS of £0.72 in the final year of projections relative to the current EPS of £0.63. With a current profit margin of 10.0%, this movement will result in a margin of 12% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Dignity, I’ve put together three relevant factors you should further examine:

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 Dignity 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 Dignity is currently mispriced by the market.

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