The latest earnings announcement Morses Club PLC (LON:MCL) released in May 2019 confirmed that the company gained from a strong tailwind, leading to a double-digit earnings growth of 24%. Below is my commentary, albeit very simple and high-level, on how market analysts view Morses Club's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' outlook for the upcoming year seems rather subdued, with earnings increasing by a single digit 2.2%. The growth outlook in the following year seems much more buoyant with rates arriving at double digit 29% compared to today’s earnings, and finally hitting UK£21m by 2022.
Although it is informative knowing the growth each year relative to today’s level, it may be more insightful to gauge the rate at which the business is rising or falling on average every year. The benefit of this technique is that it ignores near term flucuations and accounts for the overarching direction of Morses Club's earnings trajectory over time, which may be more relevant for long term investors. To calculate 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 12%. This means that, we can anticipate Morses Club will grow its earnings by 12% every year for the next couple of years.
For Morses Club, I've compiled three pertinent factors you should further research:
- 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 MCL 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 MCL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MCL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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