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In December 2018, Aurizon Holdings Limited (ASX:AZJ) released its earnings update. Generally, analyst consensus outlook appear pessimistic, with profits predicted to drop by -5.9% next year. However, this outlook is not unfounded, given the 5-year track record of negative growth. Presently, with latest-twelve-month earnings at AU$560m, we should see this fall to AU$527m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Aurizon Holdings in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Aurizon Holdings in the longer term?
The view from 10 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for AZJ, 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.
This results in an annual growth rate of 7.2% based on the most recent earnings level of AU$560m to the final forecast of AU$609m by 2022. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of A$0.28 in the final year of forecast compared to the current A$0.28 EPS today. In 2022, AZJ's profit margin will have expanded from 18% to 19%.
Future outlook is only one aspect when you're building an investment case for a stock. For Aurizon Holdings, I've put together three relevant 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 Aurizon Holdings 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 Aurizon Holdings is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Aurizon Holdings? 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 firstname.lastname@example.org. 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.