What Should Investors Know About The Future Of Tesco PLC’s (LON:TSCO)?

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In February 2019, Tesco PLC (LON:TSCO) announced its earnings update. Overall, analyst forecasts seem fairly subdued, as a 18% rise in profits is expected in the upcoming year, relative to the higher past 5-year average growth rate of 39%. With trailing-twelve-month net income at current levels of UK£1.3b, we should see this rise to UK£1.6b in 2020. Below is a brief commentary around Tesco’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

See our latest analysis for Tesco

How will Tesco perform in the near future?

The 17 analysts covering TSCO view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for TSCO, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

LSE:TSCO Past and Future Earnings, June 19th 2019
LSE:TSCO Past and Future Earnings, June 19th 2019

This results in an annual growth rate of 12% based on the most recent earnings level of UK£1.3b to the final forecast of UK£1.9b by 2022. EPS reaches £0.20 in the final year of forecast compared to the current £0.14 EPS today. With a current profit margin of 2.1%, this movement will result in a margin of 2.8% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Tesco, I’ve compiled three relevant factors 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 Tesco 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 Tesco is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Tesco? 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.