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SDL plc's (LON:SDL) most recent earnings announcement in April 2019 signalled that the business faced a minor headwind with earnings declining from UK£15m to UK£15m, a change of -3.9%. Below is a brief commentary on my key takeaways on how market analysts view SDL's earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Check out our latest analysis for SDL
Analysts' outlook for the coming year seems optimistic, with earnings climbing by a significant 51%. This high growth in earnings is expected to continue, bringing the bottom line up to UK£31m by 2022.
Although it’s useful to understand the growth year by year relative to today’s figure, it may be more valuable to gauge the rate at which the business is rising or falling every year, on average. The advantage of this technique is that we can get a better picture of the direction of SDL's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've inserted 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 22%. This means, we can assume SDL will grow its earnings by 22% every year for the next few years.
Next Steps:
For SDL, I've compiled three essential aspects 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 SDL 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 SDL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SDL? 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.