On 29 June 2019, TransDigm Group Incorporated (NYSE:TDG) announced its earnings update. Overall, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 39% next year compared with the past 5-year average growth rate of 26%. Presently, with latest-twelve-month earnings at US$905m, we should see this growing to US$1.3b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
What can we expect from TransDigm Group in the longer term?
Over the next three years, it seems the consensus view of the 16 analysts covering TDG 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. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of TDG’s earnings growth over these next few years.
By 2022, TDG’s earnings should reach US$1.8b, from current levels of US$905m, resulting in an annual growth rate of 24%. This leads to an EPS of $25.48 in the final year of projections relative to the current EPS of $16.28. Margins are currently sitting at 24%, which is expected to expand to 32% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For TransDigm Group, I’ve put together three important factors you should look at:
- 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 TransDigm 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 TransDigm Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of TransDigm 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!
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 firstname.lastname@example.org. 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.