Looking at QinetiQ Group plc’s (LON:QQ.) earnings update in March 2019, analyst consensus outlook appear pessimistic, with profits predicted to drop by 7.3% next year compared with the past 5-year average growth rate of 11%. Currently with a trailing-twelve-month profit of UK£114m, the consensus growth rate suggests that earnings will drop to UK£106m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is QinetiQ Group going to perform in the near future?
Longer term expectations from the 7 analysts covering QQ.’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of QQ.’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
By 2022, QQ.’s earnings should reach UK£117m, from current levels of UK£114m, resulting in an annual growth rate of 1.9%. This leads to an EPS of £0.21 in the final year of projections relative to the current EPS of £0.20. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 13% to 12% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For QinetiQ Group, 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 QinetiQ 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 QinetiQ Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of QinetiQ 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.