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Since Reliance Worldwide Corporation Limited (ASX:RWC) released its earnings in December 2018, analysts seem highly optimistic, with profits predicted to ramp up by an impressive 74% next year, compared with the previous 5-year average growth rate of 27%. With trailing-twelve-month net income at current levels of AU$66m, we should see this rise to AU$115m in 2020. Below is a brief commentary around Reliance Worldwide’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
See our latest analysis for Reliance Worldwide
Can we expect Reliance Worldwide to keep growing?
Over the next three years, it seems the consensus view of the 11 analysts covering RWC is skewed towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of RWC’s earnings growth over these next few years.
By 2022, RWC’s earnings should reach AU$140m, from current levels of AU$66m, resulting in an annual growth rate of 15%. This leads to an EPS of A$0.24 in the final year of projections relative to the current EPS of A$0.12. With a current profit margin of 8.6%, this movement will result in a margin of 13% by 2022.
Next Steps:
Future outlook is only one aspect when you’re building an investment case for a stock. For Reliance Worldwide, I’ve put together three relevant 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 Reliance Worldwide 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 Reliance Worldwide is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Reliance Worldwide? 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 editorial-team@simplywallst.com. 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.