Nextdc Ltd expansion plans support the next decade of strong earnings

Nextdc Ltd’s (ASX: NXT) share price has had a good year, returning 74% to shareholders. The company is trading on a spectacular forward price-earnings-ratio (PER) of 141x but earnings growth is also forecast to be strong over the next decade according to UBS. UBS expects FY19-29E EBITDA CAGR of 26%.

Nextdc is involved in the development and operation of independent data centres in Australia, supporting outsourced data centre infrastructure and cloud connectivity.

The company is embarking on its next wave of expansion by increasing its capacity by 142%.  UBS believes this will underpin a very strong earnings growth profile over the next decade with strong accelerating demand for cloud computing.  Nextdc in a perfect position to read the benefits with its data centres.

The high valuation may leave some investors a bit wary but the company is on the right track as data centres and cloud computing are becoming a part of the landscape.

UBS maintains its Buy recommendation.

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Motley Fool contributor Rosemary Steinfort has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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