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Will McCarthy & Stone plc’s (LON:MCS) Earnings Grow In The Years Ahead?

Lee Kay

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In August 2018, McCarthy & Stone plc (LON:MCS) announced its most recent earnings update, which revealed that the business endured a major headwind with earnings declining by -38%. Below, I’ve laid out key growth figures on how market analysts view McCarthy & Stone’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

View our latest analysis for McCarthy & Stone

Market analysts’ consensus outlook for this coming year seems buoyant, with earnings growing by a robust 26%. However, earnings is expected to fall slightly in the following year before rising again to UK£66m in 2022.

LSE:MCS Future Profit February 12th 19

Although it’s useful to understand the growth each year relative to today’s level, it may be more valuable to gauge the rate at which the earnings are rising or falling on average every year. The pro of this approach is that we can get a better picture of the direction of McCarthy & Stone’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute this rate, I’ve inserted 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 11%. This means, we can expect McCarthy & Stone will grow its earnings by 11% every year for the next few years.

Next Steps:

For McCarthy & Stone, I’ve put together three key aspects you should look at:

  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 MCS 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 MCS is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MCS? 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.