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Delegat Group Limited (NZSE:DGL): Is It A Smart Long Term Opportunity?

Based on Delegat Group Limited’s (NZSE:DGL) earnings update in June 2018, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 7.0% next year against the past 5-year average growth rate of 2.9%. Presently, with latest-twelve-month earnings at NZ$47m, we should see this growing to NZ$50m by 2019. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Delegat Group in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Delegat Group

How is Delegat Group going to perform in the near future?

Over the next three years, it seems the consensus view of the 3 analysts covering DGL is skewed towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for DGL, 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.

NZSE:DGL Future Profit October 24th 18
NZSE:DGL Future Profit October 24th 18

By 2021, DGL’s earnings should reach NZ$65m, from current levels of NZ$47m, resulting in an annual growth rate of 11%. This leads to an EPS of NZ$0.64 in the final year of projections relative to the current EPS of NZ$0.46. Earnings growth appears to be a result of reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. In 2021, DGL’s profit margin will have expanded from 17% to 18%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Delegat Group, I’ve put together three fundamental aspects you should further examine:

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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 Delegat Group 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 Delegat Group is currently mispriced by the market.

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