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The latest earnings update Adelaide Brighton Limited (ASX:ABC) released in December 2018 showed that the company gained from a slight tailwind, leading to a single-digit earnings growth of 1.4%. Investors may find it useful to understand how market analysts predict Adelaide Brighton’s earnings growth trajectory over the next couple of 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.
Market analysts’ consensus outlook for the coming year seems pessimistic, with earnings falling by a double-digit -10%. In the following year, earnings begin to improve, but face another reduce in 2022 with earnings generating AU$168m.
Although it is useful to understand the growth rate year by year relative to today’s figure, it may be more valuable to analyze the rate at which the business is rising or falling on average every year. The benefit of this technique is that we can get a bigger picture of the direction of Adelaide Brighton’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To calculate this rate, I put 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 -2.5%. This means, we can presume Adelaide Brighton will chip away at a rate of -2.5% every year for the next few years.
For Adelaide Brighton, I’ve compiled three relevant aspects you should further research:
- 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 ABC 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 ABC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ABC? 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 email@example.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.