In December 2018, LyondellBasell Industries N.V. (NYSE:LYB) released its most recent earnings announcement, which indicated that the company faced a slight headwind with earnings declining from US$4.9b to US$4.7b, a change of -4.1%. Investors may find it useful to understand how market analysts predict LyondellBasell Industries’s earnings growth outlook over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ expectations for next year seems pessimistic, with earnings reducing by a double-digit -17%. However, the following year shows a contrast, with earnings growth becoming positive at 0.1% compared to today’s earnings level. Earnings are then expected to decline to US$4.6b in 2022.
Even though it is informative understanding the growth rate year by year relative to today’s level, it may be more valuable to evaluate the rate at which the business is growing on average every year. The benefit of this approach is that we can get a better picture of the direction of LyondellBasell Industries’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. 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 1.5%. This means, we can presume LyondellBasell Industries will grow its earnings by 1.5% every year for the next few years.
For LyondellBasell Industries, there are three pertinent 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 LYB 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 LYB is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LYB? 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.
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