Yahoo Finance Morses Club PLC (LON:MCL): Are Analysts’ Forecast Signalling Trouble Ahead?
After Morses Club PLC’s (LON:MCL) recent earnings announcement in February 2018, analyst forecasts seem bearish, with profits predicted to drop by -14% next year. However, this outlook is not unfounded, given the negative past 5-year average earnings growth. Presently, with latest-twelve-month earnings at UK£13m, we should see this fall to UK£11m by 2019. Below is a brief commentary around Morses Club’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
See our latest analysis for Morses Club
Can we expect Morses Club to keep growing?
The view from 5 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of MCL’s earnings growth over these next few years.
This results in an annual growth rate of 11% based on the most recent earnings level of UK£13m to the final forecast of UK£18m by 2021. This leads to an EPS of £0.14 in the final year of projections relative to the current EPS of £0.10. Growth in earnings appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. With a current profit margin of 11%, this movement will result in a margin of 12% by 2021.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Morses Club, I’ve put together three fundamental 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 Morses Club 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 Morses Club is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Morses Club? 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.
