The latest earnings update Rathbone Brothers Plc (LON:RAT) released in February 2019 revealed that the business faced a minor headwind with earnings declining from UK£47m to UK£46m, a change of -1.4%. Investors may find it useful to understand how market analysts view Rathbone Brothers’s earnings growth outlook over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ outlook for the coming year seems buoyant, with earnings rising by a robust 15%. This growth seems to continue into the following year with rates reaching double digit 44% compared to today’s earnings, and finally hitting UK£74m by 2022.
Although it is helpful to understand the rate of growth each year relative to today’s figure, it may be more valuable evaluating the rate at which the earnings are moving every year, on average. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of Rathbone Brothers’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 16%. This means that, we can assume Rathbone Brothers will grow its earnings by 16% every year for the next couple of years.
For Rathbone Brothers, I’ve compiled three key 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 RAT 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 RAT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RAT? 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.