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Estia Health Limited (ASX:EHE): Earnings Expected To Remain Subdued

Simply Wall St

On 30 June 2019, Estia Health Limited ( ASX:EHE ) released its most recent earnings update. Generally, it seems that analyst forecasts are fairly bearish, with profits predicted to drop by 15% next year compared with the past 5-year average growth rate of 48%. Currently with a trailing-twelve-month profit of AU$41m, the consensus growth rate suggests that earnings will drop to AU$35m by 2020. Below is a brief commentary around Estia Health's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here .

Check out our latest analysis for Estia Health

How is Estia Health going to perform in the near future?

The longer term view from the 5 analysts covering EHE is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of EHE'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.

ASX:EHE Past and Future Earnings, August 21st 2019

By 2022, EHE's earnings should reach AU$44m, from current levels of AU$41m, resulting in an annual growth rate of 1.7%. This leads to an EPS of A$0.16 in the final year of projections relative to the current EPS of A$0.16. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 7.0% to 6.6% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Estia Health, 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 Estia Health 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 Estia Health is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Estia Health? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com . This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.