Matthews International Corporation’s (NASDAQ:MATW) released its most recent earnings update in September 2018, which confirmed that the company benefited from a strong tailwind, leading to a double-digit earnings growth of 44%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Matthews International’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
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Analysts’ expectations for this coming year seems rather muted, with earnings growing by a single digit 0.6%. The following year doesn’t look much more exciting, though earnings does reach US$121m in 2022.
While it is informative understanding the rate of growth year by year relative to today’s value, it may be more beneficial estimating the rate at which the business is rising or falling on average every year. The pro of this approach is that we can get a bigger picture of the direction of Matthews International’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 inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 4.1%. This means that, we can assume Matthews International will grow its earnings by 4.1% every year for the next couple of years.
For Matthews International, there are three key 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 MATW 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 MATW is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MATW? 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 firstname.lastname@example.org.