Will Caltex Australia Limited’s (ASX:CTX) Earnings Grow Over The Next Few Years?

Caltex Australia Limited’s (ASX:CTX) announced its latest earnings update in December 2017, which signalled that the company benefited from a slight tailwind, leading to a single-digit earnings growth of 1.50%. Below, I’ve laid out key growth figures on how market analysts view Caltex Australia’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.

Check out our latest analysis for Caltex Australia

Analysts’ expectations for the coming year seems rather muted, with earnings expanding by a single digit 1.98%. However, the following year seems to show a contrast, with earnings decreasing by -3.14%. This volatility continues into the final year of forecast, with earnings generating AU$636.45m.

ASX:CTX Future Profit August 7th 18
ASX:CTX Future Profit August 7th 18

Although it is informative knowing the rate of growth each year relative to today’s level, it may be more valuable to determine the rate at which the business is moving on average every year. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Caltex Australia’s earnings trajectory over time, be more volatile. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is -0.10%. This means, we can anticipate Caltex Australia will chip away at a rate of -0.10% every year for the next couple of years.

Next Steps:

For Caltex Australia, I’ve compiled three essential factors you should further research:

  1. 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.
  2. Valuation: What is CTX 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 CTX is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CTX? 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 editorial-team@simplywallst.com.