RSA Insurance Group plc’s (LON:RSA) latest earnings announcement in December 2018 signalled that the company benefited from a robust tailwind, leading to a double-digit earnings growth of 21%. Below is my commentary, albeit very simple and high-level, on how market analysts predict RSA Insurance Group’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. 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.
Market analysts’ prospects for next year seems positive, with earnings expanding by a robust 43%. This growth seems to continue into the following year with rates arriving at double digit 59% compared to today’s earnings, and finally hitting UK£529m by 2022.
Even though it is informative understanding the growth rate year by year relative to today’s level, it may be more insightful estimating the rate at which the company is rising or falling on average every year. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of RSA Insurance Group’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I’ve inserted 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 12%. This means, we can presume RSA Insurance Group will grow its earnings by 12% every year for the next few years.
For RSA Insurance Group, I’ve compiled three relevant factors you should further examine:
- 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 RSA 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 RSA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of RSA? 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.