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The latest earnings update Aflac Incorporated (NYSE:AFL) released in December 2018 indicated that the company experienced a major headwind with earnings declining by -37%. Below is my commentary, albeit very simple and high-level, on how market analysts view Aflac’s earnings growth outlook over the next few 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’ outlook for next year seems rather subdued, with earnings expanding by a single digit 5.0%. The following years do not look much more exciting, with earnings reaching US$3.1b before falling in 2022.
Even though it is informative knowing the growth year by year relative to today’s figure, it may be more insightful gauging the rate at which the business is growing on average every year. The advantage of this approach is that we can get a better picture of the direction of Aflac’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute 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 2.0%. This means, we can expect Aflac will grow its earnings by 2.0% every year for the next couple of years.
For Aflac, I’ve compiled three essential factors 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 AFL 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 AFL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AFL? 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.