In December 2018, Meridian Energy Limited (NZSE:MEL) released its earnings update. Generally, analysts seem fairly confident, with earnings expected to grow by 26% in the upcoming year against the past 5-year average growth rate of -3.4%. With trailing-twelve-month net income at current levels of NZ$201m, we should see this rise to NZ$254m in 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Meridian Energy in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
What can we expect from Meridian Energy in the longer term?
The view from 6 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.
From the current net income level of NZ$201m and the final forecast of NZ$270m by 2022, the annual rate of growth for MEL’s earnings is 4.1%. EPS reaches NZ$0.12 in the final year of forecast compared to the current NZ$0.078 EPS today. Margins are currently sitting at 7.3%, which is expected to expand to 10.0% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Meridian Energy, there are three pertinent factors you should further research:
- 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 Meridian Energy 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 Meridian Energy is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Meridian Energy? 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.