OZ Minerals Limited’s (ASX:OZL) latest earnings announcement in December 2018 showed that the business endured a slight headwind with earnings declining from AU$231m to AU$222m, a change of -3.8%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive OZ Minerals’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for next year seems pessimistic, with earnings declining by a double-digit -28%. Over the medium term, earnings will begin to improve, climbing year on year, and generating AU$300m by 2022.
Although it’s useful to be aware of the growth year by year relative to today’s figure, it may be more beneficial estimating the rate at which the company is growing on average every year. The advantage of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of OZ Minerals’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 11%. This means, we can assume OZ Minerals will grow its earnings by 11% every year for the next couple of years.
For OZ Minerals, I’ve compiled three key 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 OZL 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 OZL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OZL? 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.