The latest earnings update Equity Residential (NYSE:EQR) released in December 2018 suggested that the company experienced a small tailwind, eventuating to a single-digit earnings growth of 9.0%. Below, I’ve laid out key numbers on how market analysts perceive Equity Residential’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. 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 the coming year seems pessimistic, with earnings declining by a double-digit -25%. Over the medium term, earnings should continue to be below today’s level, with a decline of -17% in 2021, eventually reaching US$544m in 2022.
Even though it is helpful to be aware of the growth year by year relative to today’s value, it may be more valuable evaluating the rate at which the company is growing every year, on average. The benefit of this method is that we can get a bigger picture of the direction of Equity Residential’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -4.9%. This means that, we can assume Equity Residential will chip away at a rate of -4.9% every year for the next couple of years.
For Equity Residential, I’ve put together three fundamental 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 EQR 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 EQR is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of EQR? 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.