What Should Investors Know About Paramount Resources Ltd.’s (TSE:POU) Future?

The latest earnings announcement Paramount Resources Ltd. (TSE:POU) released in December 2018 showed that the company entered the red zone with earnings dropping into the negative territory as a result of recent headwinds. Today I want to provide a brief commentary on how market analysts view Paramount Resources’s earnings growth outlook over the next couple of 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.

See our latest analysis for Paramount Resources

Analysts’ outlook for the coming year seems positive, with earnings becoming less negative, generating -CA$156.9m in 2020.

TSX:POU Past and Future Earnings, April 17th 2019
TSX:POU Past and Future Earnings, April 17th 2019

While it’s useful to understand the growth rate year by year relative to today’s value, it may be more insightful to gauge the rate at which the earnings are rising or falling every year, on average. The benefit of this technique is that we can get a bigger picture of the direction of Paramount Resources’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. 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 46%. This means that, we can expect Paramount Resources will grow its earnings by 46% every year for the next couple of years.

Next Steps:

For Paramount Resources, I’ve compiled three important 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 POU 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 POU is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of POU? 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 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.