Electrocomponents plc’s (LON:ECM) latest earnings announcement in June 2019 confirmed that the company experienced a slight headwind with earnings deteriorating from UK£150m to UK£148m, a change of -1.0%. Below, I’ve presented key growth figures on how market analysts view Electrocomponents’s earnings growth outlook over the next few 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 positive, with earnings climbing by a robust 15%. This growth seems to continue into the following year with rates arriving at double digit 26% compared to today’s earnings, and finally hitting UK£204m by 2022.
Even though it is useful to understand the rate of growth year by year relative to today’s value, it may be more beneficial evaluating the rate at which the earnings are moving every year, on average. The pro of this technique is that we can get a better picture of the direction of Electrocomponents’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 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 10%. This means that, we can expect Electrocomponents will grow its earnings by 10% every year for the next couple of years.
For Electrocomponents, I’ve compiled three pertinent aspects 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 ECM 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 ECM is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ECM? 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.