The latest earnings update Visteon Corporation (NASDAQ:VC) released in December 2018 signalled that the business experienced a small tailwind, leading to a single-digit earnings growth of 2.5%. Below is a brief commentary on my key takeaways on how market analysts predict Visteon’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.
Analysts’ outlook for the coming year seems pessimistic, with earnings falling by a double-digit -20%. However, the next few years seem to illustrate a completely different picture, with expected earnings growth rates generating double digit 18% compared to today’s level and continues to increase.
Although it is useful to understand the growth year by year relative to today’s value, it may be more valuable evaluating the rate at which the earnings are growing every year, on average. The pro of this method is that we can get a bigger picture of the direction of Visteon’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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 18%. This means, we can assume Visteon will grow its earnings by 18% every year for the next few years.
For Visteon, 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 VC 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 VC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of VC? 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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.