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The latest earnings announcement Teradyne, Inc. (NASDAQ:TER) released in December 2018 showed that the company gained from a sizeable tailwind, eventuating to a high double-digit earnings growth of 75%. Below, I’ve presented key growth figures on how market analysts view Teradyne’s earnings growth outlook over the next couple of 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.
Market analysts’ prospects for the upcoming year seems pessimistic, with earnings falling by a double-digit -24%. Beyond this, earnings will begin to improve, climbing year on year, and reaching US$441m by 2022.
Although it’s helpful to understand the rate of growth each year relative to today’s value, it may be more beneficial to estimate the rate at which the earnings are moving on average every year. The advantage of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Teradyne’s earnings trajectory over time, which may be more relevant for long term investors. 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 -0.7%. This means that, we can assume Teradyne will chip away at a rate of -0.7% every year for the next few years.
For Teradyne, there are three essential factors 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 TER 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 TER is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of TER? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.