The latest earnings update Japara Healthcare Limited’s (ASX:JHC) released in June 2017 signalled that the business endured a minor headwind with earnings deteriorating from A$30.4M to A$29.7M, a change of -2.18%. Today I want to provide a brief commentary on how market analysts perceive Japara Healthcare’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. See our latest analysis for Japara Healthcare
Market analysts’ consensus outlook for the upcoming year seems pessimistic, with earnings reducing by a double-digit -17.59%. In the next couple of years, earnings will begin to improve, increasing year on year, and arriving at A$31.9M by 2020.
Although it is helpful to be aware of the growth rate year by year relative to today’s figure, it may be more insightful to analyze the rate at which the company is rising or falling on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Japara Healthcare’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute 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 2.29%. This means that, we can assume Japara Healthcare will grow its earnings by 2.29% every year for the next couple of years.
Next Steps:
For Japara Healthcare, I’ve compiled three pertinent aspects you should further research:
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 JHC 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 JHC is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of JHC? 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 pass 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.