Will World Wrestling Entertainment Inc’s (WWE) Earnings Grow Over The Next Year?

What can investors expect from World Wrestling Entertainment Inc (NYSE:WWE) in the future? What are the important facts you need to know? I’m going to look at the latest data and analyse this growth stock in more detail. View our latest analysis for World Wrestling Entertainment

Exciting times ahead?

If you are bullish about World Wrestling Entertainment’s growth potential then you are certainly not alone. Based on analysts prediction earnings are to grow anywhere from 90% to 186% over the next three years which is roughly an average yearly $0.3 increase in earnings per share.

World Wrestling Entertainment (NYSE:WWE) Past Future Earnings Mar 30th 17
World Wrestling Entertainment (NYSE:WWE) Past Future Earnings Mar 30th 17

In the same period we will see the revenue grow from $729 Million to $983 Million in 2020 and profit is predicted to grow from $34 M to $95 M in 2020, roughly growing 2.8x. Margins are expected to be not high but still acceptable at 9.7% during this time as well.

Basis for the growth

World Wrestling Entertainment has outperformed the average growth in earnings of the Media industry over the past year.

Whilst WWE’s Return on Equity of 15.1% isn’t horrific, it means that the company has underperformed the Media industry average of 18.56%. The level is expected to rise in 3 years time to a very attractive ROE of 32.9%.

World Wrestling Entertainment (NYSE:WWE) Future Perf Mar 30th 17
World Wrestling Entertainment (NYSE:WWE) Future Perf Mar 30th 17

Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.

Conclusion

World Wrestling Entertainment is a fast growing company, but as Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price“. Is WWE overpriced? Or could it be considered an undervalued opportunity? I recommend you see our latest FREE analysis to find out!

If you are not interested in WWE anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.