Stock Analysis

Will Cairn Energy plc's (LON:CNE) Earnings Grow In The Years Ahead?

LSE:CNE
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Cairn Energy plc's (LSE:CNE) released its most recent earnings update in December 2017, which indicated that the business finally turned profitable after delivering negative earnings on average over the past couple of years. Below, I've laid out key numbers on how market analysts perceive Cairn Energy's earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. See our latest analysis for Cairn Energy

Analysts' expectations for next year seems pessimistic, with earnings reducing by a double-digit -94.50%. In the next couple of years, earnings are expected to continue to be below today's level, with a decline of -75.19% in 2020, eventually reaching US$65.28M in 2021.

LSE:CNE Future Profit Apr 9th 18
LSE:CNE Future Profit Apr 9th 18

While it is informative knowing the growth each year relative to today’s level, it may be more insightful analyzing the rate at which the company is growing on average every year. The benefit of this method is that we can get a bigger picture of the direction of Cairn Energy'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've appended 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 -53.61%. This means, we can expect Cairn Energy will chip away at a rate of -53.61% every year for the next couple of years.

Next Steps:

For Cairn Energy, I've put together three fundamental factors you should further research:

  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. Future Earnings: How does CNE's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CNE? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.