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On 31 December 2018, Lazard Ltd (NYSE:LAZ) announced its latest earnings update. Overall, analyst consensus outlook appear bearish, with earnings expected to decline by -12% in the upcoming year. Though this pessimism is not unfounded, given the 5-year track record of negative growth. Currently with a trailing-twelve-month profit of US$527m, the consensus growth rate suggests that earnings will drop to US$463m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
How will Lazard perform in the near future?
The 8 analysts covering LAZ view its longer term outlook with a negative sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of LAZ’s earnings growth over these next few years.
This results in an annual growth rate of -2.6% based on the most recent earnings level of US$527m to the final forecast of US$494m by 2022. EPS reaches $4.22 in the final year of forecast compared to the current $4.43 EPS today. The bottom-line decline seems to be caused by cost growth exceeding top-line growth of 1.9% in the next three years. With this high cost growth, margins is expected to contract from 19% to 16% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Lazard, I’ve put together three pertinent aspects you should further research:
- 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 Lazard 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 Lazard is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lazard? 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.