The latest earnings release Fidelity National Information Services, Inc.’s (NYSE:FIS) announced in December 2018 signalled that the business experienced a significant headwind with earnings deteriorating by -33%. Below is a brief commentary on my key takeaways on how market analysts view Fidelity National Information Services’s earnings growth trajectory over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts’ expectations for next year seems buoyant, with earnings increasing by a robust 40%. This growth seems to continue into the following year with rates reaching double digit 57% compared to today’s earnings, and finally hitting US$1.4b by 2022.
While it is useful to be aware of the rate of growth each year relative to today’s figure, it may be more valuable analyzing the rate at which the business is growing on average every year. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Fidelity National Information Services’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 18%. This means that, we can presume Fidelity National Information Services will grow its earnings by 18% every year for the next couple of years.
For Fidelity National Information Services, I’ve put together three important factors you should further examine:
- 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 FIS 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 FIS is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of FIS? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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