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Baxter International Inc.’s (NYSE:BAX) most recent earnings update in December 2018 revealed that the business benefited from a substantial tailwind, more than doubling its earnings from the prior year. Below is my commentary, albeit very simple and high-level, on how market analysts predict Baxter International’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ outlook for this coming year seems pessimistic, with earnings falling by -2.5%. But in the following year, there is a complete contrast in performance, with reaching double digit 12% compared to today’s level and continues to increase to US$2.0b in 2022.
While it is informative knowing the growth rate each year relative to today’s value, it may be more valuable to determine the rate at which the business is moving on average every year. The advantage of this approach is that we can get a bigger picture of the direction of Baxter International’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate 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 9.1%. This means that, we can expect Baxter International will grow its earnings by 9.1% every year for the next couple of years.
For Baxter International, I’ve put together three fundamental factors 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 BAX 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 BAX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BAX? 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 firstname.lastname@example.org.