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Premier Oil plc's (LON:PMO) latest earnings announcement in December 2018 signalled that the company finally turned profitable after delivering negative earnings on average over the last couple of years. Below is a brief commentary on my key takeaways on how market analysts view Premier Oil's earnings growth trajectory over the next few years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' expectations for the upcoming year seems optimistic, with earnings expanding by a robust 31%. This growth seems to continue into the following year with rates arriving at double digit 53% compared to today’s earnings and decreases to US$145m by 2022.
Although it is helpful to understand the rate of growth year by year relative to today’s level, it may be more beneficial to evaluate the rate at which the earnings are moving on average every year. The pro of this method is that it ignores near term flucuations and accounts for the overarching direction of Premier Oil's earnings trajectory over time, be more volatile. To calculate this rate, I've appended 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 -9.6%. This means, we can anticipate Premier Oil will chip away at a rate of -9.6% every year for the next couple of years.
For Premier Oil, I've put together three fundamental 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 PMO 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 PMO is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PMO? 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.