Pennon Group Plc’s (LON:PNN) announced its latest earnings update in June 2019, which revealed that the business experienced a small tailwind, leading to a single-digit earnings growth of 6.8%. Below, I’ve presented key growth figures on how market analysts view Pennon Group’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for next year seems rather subdued, with earnings climbing by a single digit 4.3%. The following year doesn’t look much more exciting, though earnings does reach UK£228m in 2022.
Even though it is helpful to be aware of the growth year by year relative to today’s level, it may be more insightful gauging the rate at which the company is growing every year, on average. The benefit of this method is that we can get a better picture of the direction of Pennon Group’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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 2.6%. This means, we can expect Pennon Group will grow its earnings by 2.6% every year for the next few years.
For Pennon Group, there are three pertinent 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 PNN 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 PNN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PNN? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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