What Should We Expect From Harvey Norman Holdings Limited’s (ASX:HVN) Earnings In The Next Couple Of Years?

In June 2018, Harvey Norman Holdings Limited (ASX:HVN) released its most recent earnings announcement, which signalled that the company endured a substantial headwind with earnings falling by -16%. Below is a brief commentary on my key takeaways on how market analysts predict Harvey Norman Holdings’s earnings growth outlook over the next few 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.

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Analysts’ outlook for next year seems pessimistic, with earnings decreasing by -3.1%. In the next couple of years, earnings are predicted to continue to be below today’s level, with a decrease of -4.1% in 2021, eventually reaching AU$360m in 2022.

ASX:HVN Future Profit January 14th 19
ASX:HVN Future Profit January 14th 19

While it is informative knowing the growth year by year relative to today’s figure, it may be more insightful to determine the rate at which the company is moving every year, on average. The benefit of this method is that we can get a bigger picture of the direction of Harvey Norman Holdings’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -0.3%. This means that, we can assume Harvey Norman Holdings will chip away at a rate of -0.3% every year for the next couple of years.

Next Steps:

For Harvey Norman Holdings, I’ve compiled three important factors you should look at:

  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 HVN 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 HVN is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HVN? 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.