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The most recent earnings release SVB Financial Group’s (NASDAQ:SIVB) announced in December 2018 revealed that the company benefited from a strong tailwind, leading to a high double-digit earnings growth of 99%. Today I want to provide a brief commentary on how market analysts predict SVB Financial Group’s earnings growth trajectory 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.
Market analysts’ consensus outlook for the upcoming year seems optimistic, with earnings rising by a robust 12%. This growth seems to continue into the following year with rates reaching double digit 24% compared to today’s earnings, and finally hitting US$1.4b by 2022.
While it’s helpful to be aware of the rate of growth each year relative to today’s level, it may be more beneficial to estimate the rate at which the business is rising or falling on average every year. The pro of this technique is that we can get a better picture of the direction of SVB Financial Group’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 10%. This means, we can anticipate SVB Financial Group will grow its earnings by 10% every year for the next couple of years.
For SVB Financial Group, I’ve put together three key 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 SIVB 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 SIVB is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SIVB? 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.