Since The Southern Company (NYSE:SO) released its earnings in December 2018, analysts seem fairly confident, as a 42% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of -3.9%. With trailing-twelve-month net income at current levels of US$2.2b, we should see this rise to US$3.2b in 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
How is Southern going to perform in the near future?
The 13 analysts covering SO view its longer term outlook with a 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 12% based on the most recent earnings level of US$2.2b to the final forecast of US$3.4b by 2022. This leads to an EPS of $3.25 in the final year of projections relative to the current EPS of $2.18. With a current profit margin of 9.5%, this movement will result in a margin of 15% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Southern, there are three important factors you should further research:
- 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 Southern 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 Southern is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Southern? 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.