In June 2017, NZME Limited (NZSE:NZM) announced its most recent earnings update, which suggested company earnings became less negative compared to the previous year’s level as a result of recent tailwinds Today I want to provide a brief commentary on how market analysts perceive NZME’s earnings growth outlook over the next few 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 NZME
Market analysts’ consensus outlook for next year seems positive, with earnings going from negative to positive. In the following year, earnings are predicted to stay relatively flat before decreasing to NZ$27.1M in 2020.
Even though it’s useful to understand the growth each year relative to today’s level, it may be more valuable evaluating the rate at which the company is rising or falling every year, on average. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of NZME’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve appended 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 3.87%. This means that, we can expect NZME will grow its earnings by 3.87% every year for the next couple of years.
Next Steps:
For NZME, I’ve compiled three essential 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 NZM 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 NZM is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of NZM? 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.