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Orkla ASA’s (OB:ORK) most recent earnings update in December 2018 confirmed that the company faced a minor headwind with earnings falling from øre3.5b to øre3.3b, a change of -6.9%. Today I want to provide a brief commentary on how market analysts predict Orkla’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.
Market analysts’ prospects for this coming year seems positive, with earnings increasing by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 21% compared to today’s earnings, and finally hitting øre4.2b by 2022.
While it’s helpful to understand the growth year by year relative to today’s figure, it may be more valuable gauging the rate at which the business is growing on average every year. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of Orkla’s earnings trajectory over time, 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 7.5%. This means that, we can anticipate Orkla will grow its earnings by 7.5% every year for the next couple of years.
For Orkla, I’ve put together three key factors 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 ORK 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 ORK is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ORK? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.