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The latest earnings announcement Biogen Inc. (NASDAQ:BIIB) released in December 2018 confirmed that the company gained from a strong tailwind, eventuating to a high double-digit earnings growth of 74%. Below is a brief commentary on my key takeaways on how market analysts predict Biogen’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. 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 upcoming year seems buoyant, with earnings expanding by a robust 19%. This growth seems to continue into the following year with rates arriving at double digit 21% compared to today’s earnings, and finally hitting US$5.4b by 2022.
Even though it is informative understanding the growth rate each year relative to today’s level, it may be more insightful to determine the rate at which the business is moving every year, on average. The advantage of this technique is that we can get a better picture of the direction of Biogen’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’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 5.3%. This means that, we can presume Biogen will grow its earnings by 5.3% every year for the next couple of years.
For Biogen, there are three essential 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 BIIB 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 BIIB is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BIIB? 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.