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How Do Analysts See CBS Corporation's (NYSE:CBS.A) Margin Performing In The Years Ahead?
CBS's steady outlook for net income drives analysts to forecast positive growth of 8.63% in the coming year, but it's critical to take a step back and think through this projection. Investors should consider the forces that are spurring this growth, as there are certain implications that can impact on shareholder return. To help investors get a top level understanding, I will try to evaluate CBS's margin behaviour so investors can evaluate the revenue and cost drivers behind future earnings projections and understand how they may impact on returns compared to the industry.
See our latest analysis for CBSWhat does CBS.A's profit margin tell us?
Attractive margins generally indicate a desirable ability to translate sales revenue in to earnings, and return for shareholders. Knowing the portion of top line revenue that is turned into net income helps to assess this ability whilst spotting profit drivers, and can be found by calculating CBS.A's profit margin.
Margin Calculation for CBS.A
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = 1.54 Billion ÷ 13.29 Billion = 11.59%
There has been an expansion in CBS's margin over the past five years, with a positive 2.09% average growth in net income and decline in revenue growth of -1.47% on average, which means that the decrease in revenue has coincided with a larger portion falling to the bottom line as the company was able to maintain a positive earnings trajectory. The current 11.59% margin seems to continue this movement, indicating that earnings growth has likely been driven through improved cost management as opposed to revenue growth.
Understanding what could be driving CBS's future earnings
Based on future expectations, CBS.A's profit margin will continue to expand, with an expectation of 4.69% in annual revenue growth and 18.64% earnings growth expected annually. This suggests future earnings growth is driven further by enhanced cost efficiency alongside revenue increases, which is enlarging the incremental amount of net income that is retained from the forecasted revenue growth. Nonetheless, those watching the stock must know a expanding margin can hold various implications on the company's performance depending on how it operates, which makes further research very important.
Next Steps:
For CBS.A, I've put together three essential aspects you should look at:
- 1. 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.
- 2. Valuation: What is CBS.A 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 CBS.A is currently mispriced by the market.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of CBS.A? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
About NasdaqGS:PARA.A
Paramount Global
Operates as a media, streaming, and entertainment company worldwide.
Undervalued with moderate growth potential.
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