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L’Oréal S.A.’s (EPA:OR) latest earnings announcement in December 2018 signalled that the business gained from a slight tailwind, leading to a single-digit earnings growth of 1.9%. Investors may find it useful to understand how market analysts view L’Oréal’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for next year seems buoyant, with earnings expanding by a robust 11%. This growth seems to continue into the following year with rates reaching double digit 19% compared to today’s earnings, and finally hitting €5.0b by 2022.
Even though it’s informative understanding the rate of growth year by year relative to today’s value, it may be more valuable gauging the rate at which the earnings are rising or falling on average every year. The benefit of this method is that we can get a bigger picture of the direction of L’Oréal’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.8%. This means that, we can presume L’Oréal will grow its earnings by 7.8% every year for the next few years.
For L’Oréal, I’ve put together three pertinent factors you should further research:
- 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 OR 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 OR is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OR? 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 firstname.lastname@example.org. 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.