Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Sanderson Farms, Inc.’s (NASDAQ:SAFM) most recent earnings update in October 2018 indicated that the company faced a immense headwind with earnings declining by -78%. Below is a brief commentary on my key takeaways on how market analysts perceive Sanderson Farms’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for the coming year seems pessimistic, with earnings reducing by a double-digit -46%. Beyond this, earnings will begin to improve, climbing year on year, and arriving at US$123m by 2022.
Although it is useful to understand the growth rate year by year relative to today’s figure, it may be more beneficial to determine the rate at which the earnings are rising or falling every year, on average. The benefit of this technique is that it ignores near term flucuations and accounts for the overarching direction of Sanderson Farms’s earnings trajectory over time, 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 24%. This means, we can presume Sanderson Farms will grow its earnings by 24% every year for the next few years.
For Sanderson Farms, I’ve compiled three key 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 SAFM 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 SAFM is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SAFM? 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.