Based on Lindsay Corporation’s (NYSE:LNN) earnings update in May 2018, the consensus outlook from analysts appear highly confident, with profits predicted to ramp up by an impressive 62% next year, relative to the historical 5-year average growth rate of -30%. Currently with trailing-twelve-month earnings of US$22m, we can expect this to reach US$35m by 2019. Below is a brief commentary on the longer term outlook the market has for Lindsay. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The view from 5 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of 22% based on the most recent earnings level of US$23m to the final forecast of US$53m by 2021. EPS reaches $4.71 in the final year of forecast compared to the current $2.17 EPS today. The bottom-line growth seems to be caused by cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. With a current profit margin of 4.5%, this movement will result in a margin of 8.9% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Lindsay, I’ve compiled three pertinent 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 Lindsay 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 Lindsay is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Lindsay? 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 email@example.com.