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The latest earnings release Allegiant Travel Company’s (NASDAQ:ALGT) announced in December 2018 confirmed that the company faced a substantial headwind with earnings deteriorating by -16%. Below is a brief commentary on my key takeaways on how market analysts perceive Allegiant Travel’s earnings growth trajectory over the next couple of 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.
Market analysts’ prospects for next year seems buoyant, with earnings growing by a robust 37%. This growth seems to continue into the following year with rates arriving at double digit 44% compared to today’s earnings, and finally hitting US$241m by 2022.
While it’s useful to understand the growth each year relative to today’s level, it may be more beneficial determining the rate at which the earnings are rising or falling every year, on average. The pro of this approach is that we can get a bigger picture of the direction of Allegiant Travel’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute 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 15%. This means that, we can presume Allegiant Travel will grow its earnings by 15% every year for the next couple of years.
For Allegiant Travel, I’ve compiled three relevant aspects 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 ALGT 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 ALGT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALGT? 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 firstname.lastname@example.org.