Navistar International Corporation (NYSE:NAV): Will The Growth Last?

Looking at Navistar International Corporation’s (NYSE:NAV) earnings update in July 2018, the consensus outlook from analysts appear fairly confident, with earnings expected to grow by 29% in the upcoming year, though this is relatively lower than the previous 5-year average earnings growth of 74%. Currently with trailing-twelve-month earnings of US$287m, we can expect this to reach US$370m by 2019. Below is a brief commentary on the longer term outlook the market has for Navistar International. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

View our latest analysis for Navistar International

Can we expect Navistar International to keep growing?

Over the next three years, it seems the consensus view of the 11 analysts covering NAV is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:NAV Future Profit November 12th 18
NYSE:NAV Future Profit November 12th 18

From the current net income level of US$29m and the final forecast of US$45m by 2021, the annual rate of growth for NAV’s earnings is 14%. EPS reaches $4.37 in the final year of forecast compared to the current $0.31 EPS today. The main reason for growth is a result of cost cutting activities, as revenues is expected to grow much slower than earnings. In 2021, NAV’s profit margin will have expanded from 0.3% to 0.5%.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Navistar International, I’ve compiled three essential factors you should look at:

  1. 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.
  2. Valuation: What is Navistar International 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 Navistar International is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Navistar International? 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 editorial-team@simplywallst.com.