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Dunkin’ Brands Group, Inc.’s (NASDAQ:DNKN) most recent earnings announcement in December 2018 revealed that the business endured a significant headwind with earnings deteriorating by -34%. Below is my commentary, albeit very simple and high-level, on how market analysts view Dunkin’ Brands Group’s earnings growth outlook over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ consensus outlook for next year seems rather muted, with earnings growing by a single digit 3.7%. The growth outlook in the following year seems much more buoyant with rates generating double digit 11% compared to today’s earnings, and finally hitting US$275m by 2022.
While it’s helpful to be aware of the growth year by year relative to today’s figure, it may be more insightful to gauge the rate at which the company is growing every year, on average. The benefit of this method is that we can get a better picture of the direction of Dunkin’ Brands Group’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended 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 5.4%. This means that, we can expect Dunkin’ Brands Group will grow its earnings by 5.4% every year for the next few years.
For Dunkin’ Brands Group, I’ve compiled three pertinent 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 DNKN 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 DNKN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DNKN? 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 email@example.com.