The most recent earnings release Lonza Group Ltd’s (VTX:LONN) announced in December 2018 revealed that the business faced a slight headwind with earnings deteriorating from CHF664m to CHF655m, a change of -1.4%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Lonza Group’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.
Market analysts’ prospects for next year seems optimistic, with earnings growing by a robust 26%. This growth seems to continue into the following year with rates reaching double digit 40% compared to today’s earnings, and finally hitting CHF1.0b by 2022.
Even though it is useful to be aware of the rate of growth each year relative to today’s figure, it may be more valuable analyzing the rate at which the company is growing every year, on average. The benefit of this method is that we can get a better picture of the direction of Lonza Group’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’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 that, we can presume Lonza Group will grow its earnings by 14% every year for the next few years.
For Lonza Group, I’ve put together three relevant 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 LONN 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 LONN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LONN? 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.