What Should You Know About SLM Corporation's (NASDAQ:SLM) Growth?

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The most recent earnings update SLM Corporation's (NASDAQ:SLM) released in December 2018 showed that the company experienced a strong tailwind, eventuating to a high double-digit earnings growth of 73%. Today I want to provide a brief commentary on how market analysts predict SLM's earnings growth trajectory over the next couple of 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.

View our latest analysis for SLM

Analysts' expectations for next year seems buoyant, with earnings rising by a robust 14%. This growth seems to continue into the following year with rates reaching double digit 30% compared to today’s earnings, and finally hitting US$674m by 2022.

Although it’s helpful to understand the rate of growth year by year relative to today’s value, it may be more insightful to estimate the rate at which the business is rising or falling on average every year. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of SLM'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 12%. This means, we can assume SLM will grow its earnings by 12% every year for the next few years.

Next Steps:

For SLM, I've compiled three fundamental aspects you should further research:

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 SLM 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 SLM is currently mispriced by the market.
3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SLM? 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.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.