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After Softcat plc's (LON:SCT) earnings announcement in January 2019, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 5.0% in the upcoming year against the higher past 5-year average growth rate of 20%. Presently, with latest-twelve-month earnings at UK£55m, we should see this growing to UK£58m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Softcat in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
See our latest analysis for Softcat
How is Softcat going to perform in the near future?
The longer term expectations from the 4 analysts of SCT is tilted towards the 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 SCT's earnings growth over these next few years.
By 2022, SCT's earnings should reach UK£64m, from current levels of UK£55m, resulting in an annual growth rate of 5.1%. This leads to an EPS of £0.37 in the final year of projections relative to the current EPS of £0.28. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 5.1% to 4.6% by the end of 2022.
Next Steps:
Future outlook is only one aspect when you're building an investment case for a stock. For Softcat, there are three pertinent aspects you should further examine:
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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.
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Valuation: What is Softcat 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 Softcat is currently mispriced by the market.
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Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Softcat? 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.