James Hardie Industries plc’s (ASX:JHX) released its most recent earnings update in March 2019, which showed that the business experienced a large tailwind, leading to a high double-digit earnings growth of 57%. Below is a brief commentary on my key takeaways on how market analysts view James Hardie Industries’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
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Analysts’ outlook for next year seems optimistic, with earnings growing by a robust 41%. This growth seems to continue into the following year with rates reaching double digit 56% compared to today’s earnings, and finally hitting US$396m by 2022.
While it’s useful to understand the growth rate each year relative to today’s value, it may be more beneficial analyzing the rate at which the business is moving every year, on average. The benefit of this approach is that it ignores near term flucuations and accounts for the overarching direction of James Hardie Industries’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 16%. This means, we can expect James Hardie Industries will grow its earnings by 16% every year for the next few years.
Next Steps:
For James Hardie Industries, I’ve compiled three important factors 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 JHX 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 JHX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of JHX? 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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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.