The latest earnings release Hostess Brands, Inc.’s (NASDAQ:TWNK) announced in December 2018 suggested that the business endured a significant headwind with earnings declining by -72%. Below, I’ve presented key growth figures on how market analysts predict Hostess Brands’s earnings growth outlook over the next couple of years and whether the future looks brighter. 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 the coming year seems pessimistic, with earnings falling by -6.3%. But in the following year, there is a complete contrast in performance, with generating double digit 19% compared to today’s level and continues to increase to US$85m in 2022.
While it is helpful to understand the rate of growth each year relative to today’s figure, it may be more beneficial to gauge the rate at which the earnings are rising or falling every year, on average. The pro of this technique is that we can get a bigger picture of the direction of Hostess Brands’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’ve appended 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 9.5%. This means, we can assume Hostess Brands will grow its earnings by 9.5% every year for the next few years.
For Hostess Brands, I’ve put together three pertinent aspects you should look at:
- 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 TWNK 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 TWNK is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TWNK? 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.