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In December 2018, Canadian Natural Resources Limited (TSE:CNQ) released its most recent earnings announcement, which signalled that the company gained from a small tailwind, eventuating to a single-digit earnings growth of 8.1%. Below is a brief commentary on my key takeaways on how market analysts perceive Canadian Natural Resources’s earnings growth trajectory 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.
Analysts’ outlook for next year seems rather muted, with earnings rising by a single digit 1.6%. The growth outlook in the following year seems much more optimistic with rates generating double digit 26% compared to today’s earnings, and finally hitting CA$4.1b by 2022.
Even though it is informative knowing the growth year by year relative to today’s level, it may be more beneficial gauging the rate at which the earnings are growing on average every year. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Canadian Natural Resources’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 14%. This means, we can expect Canadian Natural Resources will grow its earnings by 14% every year for the next couple of years.
For Canadian Natural Resources, I’ve compiled three essential factors you should further examine:
- 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 CNQ 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 CNQ is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CNQ? 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.