Looking at Teradyne, Inc.’s (NASDAQ:TER) earnings update in December 2018, analysts seem cautiously bearish, with profits predicted to rise by -24% next year relative to the higher past 5-year average growth rate of 17%. Presently, with latest-twelve-month earnings at US$452m, we should see this growing to US$346m by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for Teradyne in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Can we expect Teradyne to keep growing?
The view from 13 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. 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.
This results in an annual growth rate of 1.2% based on the most recent earnings level of US$452m to the final forecast of US$477m by 2022. EPS reaches $2.82 in the final year of forecast compared to the current $2.41 EPS today. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 22% to 18% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Teradyne, I’ve put together three pertinent 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 Teradyne 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 Teradyne is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Teradyne? 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 email@example.com. 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.