In June 2018, Peet Limited (ASX:PPC) released its earnings update. Generally, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 0.7% next year against the higher past 5-year average growth rate of 22%. Presently, with latest-twelve-month earnings at AU$49m, we should see this growing to AU$49m by 2019. Below is a brief commentary on the longer term outlook the market has for Peet. For those interested in more of an analysis of the company, you can research its fundamentals here.

Check out our latest analysis for Peet

What can we expect from Peet in the longer term?

Longer term expectations from the 2 analysts covering PPC’s stock is one of negative 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 PPC’s earnings growth over these next few years.

This results in an annual growth rate of -5.4% based on the most recent earnings level of AU$49m to the final forecast of AU$42m by 2021. This leads to an EPS of A$0.090 in the final year of projections relative to the current EPS of A$0.10. The bottom-line decline seems to be caused by cost outpacing top line growth of 3.3% over the next few years. Furthermore, the current 17% margin is expected to contract to 13% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Peet, I’ve compiled three important 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 Peet 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 Peet is currently mispriced by the market.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Peet? 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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.