Yahoo Finance Contact Energy Limited (NZSE:CEN): Is It A Smart Long Term Opportunity?
In June 2018, Contact Energy Limited (NZSE:CEN) announced its earnings update. Overall, it seems that analyst forecasts are fairly optimistic, with earnings expected to grow by 32.3% in the upcoming year compared with the past 5-year average growth rate of -13.7%. Currently with trailing-twelve-month earnings of NZ$112.0m, we can expect this to reach NZ$148.1m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
See our latest analysis for Contact Energy
How will Contact Energy perform in the near future?
Over the next three years, it seems the consensus view of the 7 analysts covering CEN is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for CEN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2021, CEN’s earnings should reach NZ$175.9m, from current levels of NZ$112.0m, resulting in an annual growth rate of 13.8%. This leads to an EPS of NZ$0.25 in the final year of projections relative to the current EPS of NZ$0.16. Growth in the bottom line seems to suggest reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, CEN’s profit margin will have expanded from 5.2% to 8.0%.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Contact Energy, there are three important aspects you should further research:
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.
Valuation: What is Contact Energy 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 Contact Energy is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Contact Energy? 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.
