In This Article:
In December 2017, Scales Corporation Limited (NZSE:SCL) announced its latest earnings update, which revealed that the business experienced a significant headwind with earnings falling by -17.05%. Below, I’ve laid out key numbers on how market analysts predict Scales’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. View our latest analysis for Scales
Analysts’ outlook for next year seems positive, with earnings expanding by a robust 23.86%. This growth seems to continue into the following year with rates arriving at double digit 28.58% compared to today’s earnings, and finally hitting NZ$43.49M by 2021.
While it is helpful to understand the growth rate year by year relative to today’s value, it may be more beneficial to gauge the rate at which the earnings are moving every year, on average. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of Scales’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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.85%. This means, we can anticipate Scales will grow its earnings by 7.85% every year for the next few years.
Next Steps:
For Scales, there are three essential aspects you should look at:
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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 SCL 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 SCL 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 SCL? 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.