Will MEG Energy Corp’s (TSE:MEG) Earnings Grow Over The Next Few Years?

The most recent earnings announcement MEG Energy Corp’s (TSX:MEG) released in December 2017 indicated that the company finally turned profitable after negative earnings on average over the last couple of years. Below is my commentary, albeit very simple and high-level, on how market analysts perceive MEG Energy’s earnings growth outlook over the next couple of 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. View our latest analysis for MEG Energy

Analysts’ outlook for next year seems pessimistic, with earnings turning into a loss in 2019. The negative earnings level is expected to stabilize over the next few years before recovering in 2021, though still loss-making.

TSX:MEG Future Profit Apr 10th 18
TSX:MEG Future Profit Apr 10th 18

Even though it is useful to be aware of the growth rate each year relative to today‚Äôs value, it may be more valuable to gauge the rate at which the earnings are moving on average every year. The pro of this method is that we can get a better picture of the direction of MEG Energy’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put 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 -45.29%. This means, we can presume MEG Energy will chip away at a rate of -45.29% every year for the next couple of years.

Next Steps:

For MEG Energy, there are three fundamental aspects 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 MEG 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 MEG is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MEG? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!