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What Are Analysts Saying About The Future Of CDK Global Inc’s (NASDAQ:CDK)?

Since CDK Global Inc (NASDAQ:CDK) released its earnings in June 2018, it seems that analyst expectations are fairly bearish, with earnings expected to grow by 6.43% in the upcoming year against the higher past 5-year average growth rate of 12.68%. Currently with trailing-twelve-month earnings of US$380.80m, we can expect this to reach US$405.30m by 2019. Below is a brief commentary on the longer term outlook the market has for CDK Global. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for CDK Global

How will CDK Global perform in the near future?

Longer term expectations from the 6 analysts covering CDK’s stock is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To understand the overall trajectory of CDK’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

NasdaqGS:CDK Future Profit August 23rd 18
NasdaqGS:CDK Future Profit August 23rd 18

From the current net income level of US$380.80m and the final forecast of US$599.66m by 2021, the annual rate of growth for CDK’s earnings is 15.28%. This leads to an EPS of $5.2 in the final year of projections relative to the current EPS of $2.8. Growth in the bottom line seems to suggest cost cutting activities, as revenues is expected to grow much slower than earnings. Margins is currently sitting at 16.75%, which is expected to expand to 24.32% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For CDK Global, there are three relevant aspects you should further research:

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  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 CDK Global 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 CDK Global is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CDK Global? 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.