In July 2018, Smiths Group plc ( LON:SMIN ) announced its latest earnings update, which indicated that the business endured a substantial headwind with earnings falling by -51%. Today I want to provide a brief commentary on how market analysts view Smiths Group’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for this coming year seems optimistic, with earnings expanding by a robust 31%. This growth seems to continue into the following year with rates reaching double digit 44% compared to today’s earnings, and finally hitting UK£396m by 2022.
Although it’s helpful to be aware of the growth rate year by year relative to today’s value, it may be more beneficial gauging the rate at which the earnings are moving on average every year. The pro of this method is that we can get a better picture of the direction of Smiths Group’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 13%. This means that, we can expect Smiths Group will grow its earnings by 13% every year for the next couple of years.
For Smiths Group, I’ve compiled three essential factors 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 SMIN 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 SMIN is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SMIN? 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 email@example.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.