After NRG Energy, Inc.’s (NYSE:NRG) earnings announcement on 31 December 2018, it seems that analyst forecasts are substantially optimistic, with earnings expected to more than double in the upcoming year, relative to the past 5-year average growth rate of -4.6%. Presently, with latest-twelve-month earnings at US$460m, we should see this growing to US$1.0b by 2020. Below is a brief commentary around NRG Energy’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Can we expect NRG Energy to keep growing?
The longer term view from the 8 analysts covering NRG is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of NRG’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
From the current net income level of US$460m and the final forecast of US$953m by 2022, the annual rate of growth for NRG’s earnings is 13%. This leads to an EPS of $4.34 in the final year of projections relative to the current EPS of $1.51. With a current profit margin of 4.9%, this movement will result in a margin of 9.2% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For NRG Energy, I’ve put together three important 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 NRG Energy 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 NRG Energy is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of NRG Energy? 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.