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The latest earnings update CareTech Holdings PLC (LON:CTH) released in September 2018 indicated that the company faced a substantial headwind with earnings deteriorating by -40%. Today I want to provide a brief commentary on how market analysts predict CareTech Holdings'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.
Check out our latest analysis for CareTech Holdings
Market analysts' prospects for the upcoming year seems positive, with earnings expanding by a significant 69%. This strong growth in earnings is expected to continue, bringing the bottom line up to UK£39m by 2022.
Even though it’s informative knowing the growth rate each year relative to today’s value, it may be more beneficial to determine the rate at which the business is rising or falling every year, on average. The pro of this technique is that we can get a bigger picture of the direction of CareTech Holdings's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 40%. This means, we can presume CareTech Holdings will grow its earnings by 40% every year for the next few years.
Next Steps:
For CareTech Holdings, there are three essential factors 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 CTH 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 CTH 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 CTH? 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.