The most recent earnings release Xencor, Inc.’s (NASDAQ:XNCR) announced in December 2018 indicated company earnings became less negative compared to the previous year’s level as a result of recent tailwinds Below is my commentary, albeit very simple and high-level, on how market analysts view Xencor’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for next year seems buoyant, with earnings becoming less negative, generating -US$62.7m in 2020.
While it is useful to understand the growth rate each year relative to today’s figure, it may be more valuable to evaluate the rate at which the business is rising or falling on average every year. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Xencor’s earnings trajectory over time, be more volatile. 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 27%. This means, we can assume Xencor will grow its earnings by 27% every year for the next few years.
For Xencor, there are three key 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 XNCR 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 XNCR is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of XNCR? 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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.