Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
The most recent earnings announcement WPX Energy, Inc.’s (NYSE:WPX) released in March 2019 showed that the company experienced a major tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts perceive WPX Energy’s earnings growth trajectory over the next few 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.
Market analysts’ prospects for this coming year seems pessimistic, with earnings reducing by a double-digit -28%. However, the next few years seem to illustrate a completely different picture, with expected earnings growth rates arriving at double digit 66% compared to today’s level and continues to increase.
While it’s helpful to be aware of the growth year by year relative to today’s level, it may be more insightful evaluating the rate at which the company is growing every year, on average. The advantage of this method is that we can get a bigger picture of the direction of WPX Energy’s earnings trajectory over the long run, irrespective of near term fluctuations, 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 35%. This means that, we can assume WPX Energy will grow its earnings by 35% every year for the next couple of years.
For WPX Energy, I’ve put together three important aspects 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 WPX 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 WPX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of WPX? 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 email@example.com. 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.