On 30 June 2019, Wesfarmers Limited (ASX:WES) announced its earnings update. Overall, analyst forecasts seem fairly subdued, as a 0.4% rise in profits is expected in the upcoming year, compared with the higher past 5-year average growth rate of 9.1%. By 2020, we can expect Wesfarmers’s bottom line to reach AU$1.9b, a jump from the current trailing-twelve-month of AU$1.9b. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Wesfarmers in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
How is Wesfarmers going to perform in the near future?
The view from 12 analysts over the next three years is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of WES's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
From the current net income level of AU$1.9b and the final forecast of AU$2.2b by 2022, the annual rate of growth for WES’s earnings is 4.5%. This leads to an EPS of A$1.97 in the final year of projections relative to the current EPS of A$1.72. In 2022, WES's profit margin will have expanded from 6.9% to 7.3%.
Future outlook is only one aspect when you're building an investment case for a stock. For Wesfarmers, I've put together three essential aspects 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 Wesfarmers 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 Wesfarmers is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Wesfarmers? 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.