ArcelorMittal’s (AMS:MT) latest earnings announcement in December 2018 suggested that the company benefited from a strong tailwind, leading to a double-digit earnings growth of 13%. Below is a brief commentary on my key takeaways on how market analysts view ArcelorMittal’s earnings growth outlook 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.
Analysts’ outlook for the upcoming year seems pessimistic, with earnings decreasing by a double-digit -25%. Over the medium term, earnings are predicted to continue to be below today’s level, with a decline of -23% in 2021, eventually reaching US$4.0b in 2022.
Although it’s helpful to be aware of the rate of growth each year relative to today’s level, it may be more valuable analyzing the rate at which the earnings are growing on average every year. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of ArcelorMittal’s earnings trajectory over time, fluctuate up and down. 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 -11%. This means that, we can anticipate ArcelorMittal will chip away at a rate of -11% every year for the next few years.
For ArcelorMittal, there are 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 MT 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 MT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MT? 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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