Yahoo Finance What Should You Know About AA plc’s (LON:AA.) Future?
In July 2018, AA plc (LON:AA.) released its earnings update. Generally, analyst forecasts appear to be in-line with its track record, as upcoming earnings growth is expected to be 2.7% next year, similar to the range of average earnings growth for the past five years of 2.8% per year. By 2019, we can expect AA’s bottom line to reach UK£72m, a jump from the current trailing-twelve-month UK£70m. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for AA in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
View our latest analysis for AA
Can we expect AA to keep growing?
The 4 analysts covering AA. view its longer term outlook with a 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 understand the overall trajectory of AA.’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
By 2021, AA.’s earnings should reach UK£180m, from current levels of UK£111m, resulting in an annual growth rate of 22%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of £0.17 in the final year of forecast compared to the current £0.18 EPS today. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 12%, which is expected to expand to 18% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For AA, I’ve compiled three pertinent factors you should look at:
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!
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 editorial-team@simplywallst.com.
