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Direct Line Insurance Group plc's (LON:DLG) latest earnings announcement in December 2018 revealed that the company gained from a slight tailwind, leading to a single-digit earnings growth of 5.3%. Below is a brief commentary on my key takeaways on how market analysts perceive Direct Line Insurance Group'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.
View our latest analysis for Direct Line Insurance Group
Analysts' outlook for next year seems pessimistic, with earnings reducing by a double-digit -13%. In the next couple of years, earnings should continue to be below today's level, with a decline of -14% in 2021, eventually reaching UK£391m in 2022.
While it is helpful to understand the growth each year relative to today’s value, it may be more beneficial to evaluate the rate at which the company is growing every year, on average. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Direct Line Insurance Group's earnings trajectory over time, be more volatile. To compute 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 -2.3%. This means that, we can expect Direct Line Insurance Group will chip away at a rate of -2.3% every year for the next couple of years.
Next Steps:
For Direct Line Insurance Group, I've compiled three fundamental 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 DLG 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 DLG is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DLG? 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.