Facebook Inc (NASDAQ:FB): Is It A Smart Long Term Opportunity?

In December 2017, Facebook Inc (NASDAQ:FB) released its most recent earnings update. Generally, analyst consensus outlook appear cautiously optimistic, with earnings expected to grow by 34.89% in the upcoming year, though this is comparatively lower than the historical 5-year average earnings growth of 53.11%. Currently with earnings of US$15.92B, we can expect this to reach US$21.47B by 2019. Below is a brief commentary around Facebook's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here. Check out our latest analysis for Facebook

What can we expect from Facebook in the longer term?

The longer term expectations from the 42 analysts of FB is tilted towards the positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To get an idea of the overall earnings growth trend for FB, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

By 2021, FB's earnings should reach US$32.11B, from current levels of US$15.92B, resulting in an annual growth rate of 18.62%. EPS reaches $10.48 in the final year of forecast compared to the current $5.49 EPS today. Earnings growth appears to be a result of top-line expansion of 19.26%, dropping down to the bottome-line. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 39.16% to 37.26% by the end of 2021.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Facebook, I've compiled three pertinent factors you should further examine:

1. 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.
2. Valuation: What is Facebook 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 Facebook is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Facebook? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.