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The most recent earnings announcement Allegion plc’s (NYSE:ALLE) released in December 2018 suggested that the business gained from a large tailwind, leading to a high double-digit earnings growth of 59%. Investors may find it useful to understand how market analysts predict Allegion’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 coming year seems rather subdued, with earnings expanding by a single digit 3.0%. The growth outlook in the following year seems much more optimistic with rates generating double digit 12% compared to today’s earnings, and finally hitting US$516m by 2022.
While it’s informative knowing the growth rate each year relative to today’s level, it may be more beneficial to determine the rate at which the earnings are rising or falling every year, on average. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of Allegion’s earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I put 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 5.9%. This means, we can expect Allegion will grow its earnings by 5.9% every year for the next few years.
For Allegion, 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 ALLE 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 ALLE is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALLE? 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 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.