The most recent earnings update Gran Tierra Energy Inc.’s (NYSEMKT:GTE) released in December 2018 showed that the business finally turned profitable after negative earnings on average over the past couple of years. Below, I’ve laid out key numbers on how market analysts view Gran Tierra Energy’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities 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 10%. This growth seems to continue into the following year with rates reaching double digit 18% compared to today’s earnings, and finally hitting US$121m by 2022.
Although it’s informative understanding the rate of growth each year relative to today’s value, it may be more valuable to estimate the rate at which the earnings are growing on average every year. The pro of this technique is that we can get a better picture of the direction of Gran Tierra Energy’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. 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 6.7%. This means that, we can presume Gran Tierra Energy will grow its earnings by 6.7% every year for the next few years.
For Gran Tierra Energy, I’ve compiled three pertinent 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 GTE 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 GTE is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GTE? 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.