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After DICK’S Sporting Goods, Inc.’s (NYSE:DKS) recent earnings announcement in February 2019, it seems that analyst forecasts are fairly pessimistic, with earnings expected to decline by 3.5% in the upcoming year. Though this pessimism is not unfounded, given the 5-year track record of negative growth. With trailing-twelve-month net income at current levels of US$320m, the consensus growth rate suggests that earnings will decline to US$309m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for DICK’S Sporting Goods in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from DICK’S Sporting Goods in the longer term?
Over the next three years, it seems the consensus view of the 22 analysts covering DKS is skewed towards the negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, DKS’s earnings should reach US$305m, from current levels of US$320m, resulting in an annual growth rate of -0.7%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $3.6 in the final year of forecast compared to the current $3.27 EPS today. The main reason for DKS’s earnings contraction is cost growth exceeding top-line growth of 1.2% in the next three years. With this high cost growth, margins is expected to contract from 3.8% to 3.5% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For DICK’S Sporting Goods, I’ve compiled three important factors you should further research:
- 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 DICK’S Sporting Goods 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 DICK’S Sporting Goods is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of DICK’S Sporting Goods? 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.