The latest earnings announcement CSR Limited (ASX:CSR) released in May 2019 indicated that the company faced a major headwind with earnings declining by -30%. Below, I’ve laid out key growth figures on how market analysts predict CSR’s earnings growth outlook over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for next year seems pessimistic, with earnings reducing by -3.7%. Beyond this, earnings are expected to continue to be below today’s level, with a reduction of -8.5% in 2021, eventually reaching AU$127m in 2022.
While it is helpful to understand the rate of growth year by year relative to today’s value, it may be more insightful evaluating the rate at which the business is growing on average every year. The benefit of this method is that we can get a bigger picture of the direction of CSR’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute 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 -2.7%. This means that, we can expect CSR will chip away at a rate of -2.7% every year for the next few years.
For CSR, there are three relevant factors you should further research:
- Valuation: What is CSR 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 CSR is currently mispriced by the market.
- Management:Have insiders been ramping up their shares to take advantage of the market’s sentiment for CSR’s future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CSR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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