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Since STMicroelectronics N.V. (EPA:STM) released its earnings in March 2019, analyst consensus outlook appear bearish, as a 13% fall in profits is expected in the upcoming year compared with the past 5-year average growth rate of 63%. With trailing-twelve-month net income at current levels of US$1.3b, the consensus growth rate suggests that earnings will decline to US$1.1b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
The view from 17 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of STM’s earnings growth over these next few years.
By 2022, STM’s earnings should reach US$1.6b, from current levels of US$1.3b, resulting in an annual growth rate of 13%. EPS reaches $1.57 in the final year of forecast compared to the current $1.43 EPS today. With a current profit margin of 13%, this movement will result in a margin of 14% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For STMicroelectronics, I’ve compiled three key factors 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 STMicroelectronics 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 STMicroelectronics is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of STMicroelectronics? 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.