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Will Lucara Diamond Corp’s (TSE:LUC) Earnings Grow In The Next 12 Months?

After Lucara Diamond Corp’s (TSE:LUC) earnings announcement in June 2018, analysts seem cautiously bearish, with profits predicted to rise by 0.3% next year relative to the higher past 5-year average growth rate of 3.3%. Currently with trailing-twelve-month earnings of US$47m, we can expect this to reach US$47m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Lucara Diamond

Can we expect Lucara Diamond to keep growing?

The 9 analysts covering LUC view its longer term outlook with a 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 LUC, 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.

TSX:LUC Future Profit November 9th 18
TSX:LUC Future Profit November 9th 18

From the current net income level of US$65m and the final forecast of US$83m by 2021, the annual rate of growth for LUC’s earnings is 16%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $0.15 in the final year of forecast compared to the current $0.17 EPS today. 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, LUC’s profit margin will have expanded from 29% to 36%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Lucara Diamond, I’ve compiled three important aspects you should look at:

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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 Lucara Diamond 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 Lucara Diamond is currently mispriced by the market.

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