KLA Corporation’s (NASDAQ:KLAC) released its most recent earnings update in August 2019, which confirmed that the business experienced a strong tailwind, leading to a double-digit earnings growth of 47%. Below, I’ve laid out key numbers on how market analysts perceive KLA’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ prospects for next year seems buoyant, with earnings increasing by a robust 16%. This growth seems to continue into the following year with rates arriving at double digit 34% compared to today’s earnings, and finally hitting US$1.8b by 2022.
Although it is useful to understand the growth year by year relative to today’s figure, it may be more beneficial analyzing the rate at which the company is moving on average every year. The benefit of this technique is that we can get a better picture of the direction of KLA’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 14%. This means that, we can expect KLA will grow its earnings by 14% every year for the next few years.
For KLA, I’ve compiled three essential factors you should further examine:
- 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 KLAC 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 KLAC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of KLAC? 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.