The most recent earnings announcement Woolworths Group Limited’s (ASX:WOW) released in June 2018 indicated that the company gained from a robust tailwind, leading to a double-digit earnings growth of 13%. Investors may find it useful to understand how market analysts predict Woolworths Group’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
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Market analysts’ prospects for the upcoming year seems optimistic, with earnings growing by a robust 17%. This growth seems to continue into the following year with rates arriving at double digit 21% compared to today’s earnings, and finally hitting AU$2.0b by 2022.
Even though it’s informative understanding the growth rate each year relative to today’s figure, it may be more beneficial evaluating the rate at which the company is moving every year, on average. The benefit of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Woolworths Group’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 5.9%. This means that, we can expect Woolworths Group will grow its earnings by 5.9% every year for the next few years.
For Woolworths Group, I’ve compiled three pertinent aspects you should look at:
- 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 WOW 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 WOW is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of WOW? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.