Williams-Sonoma, Inc.’s (NYSE:WSM) released its most recent earnings update in February 2019, which revealed that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 29%. Investors may find it useful to understand how market analysts perceive Williams-Sonoma’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts’ outlook for this coming year seems rather muted, with earnings rising by a single digit 7.9%. The following year doesn’t look much more exciting, though earnings does reach US$369m in 2022.
Although it’s useful to understand the rate of growth each year relative to today’s value, it may be more beneficial to gauge the rate at which the company is rising or falling every year, on average. The advantage of this method is that we can get a bigger picture of the direction of Williams-Sonoma’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 3.8%. This means, we can assume Williams-Sonoma will grow its earnings by 3.8% every year for the next couple of years.
For Williams-Sonoma, there are 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 WSM 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 WSM is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of WSM? 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.