Owens Corning’s (NYSE:OC) most recent earnings announcement in December 2018 revealed that the company experienced a large tailwind, eventuating to a high double-digit earnings growth of 89%. Below is a brief commentary on my key takeaways on how market analysts perceive Owens Corning’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. 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 next year seems pessimistic, with earnings falling by -1.0%. But in the following year, there is a complete contrast in performance, with arriving at double digit 12% compared to today’s level and continues to increase to US$651m in 2022.
While it’s informative understanding the rate of growth each year relative to today’s figure, it may be more beneficial analyzing the rate at which the business is rising or falling every year, on average. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Owens Corning’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put 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 6.5%. This means, we can assume Owens Corning will grow its earnings by 6.5% every year for the next few years.
For Owens Corning, there are three important 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 OC 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 OC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of OC? 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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