Pentair plc’s (NYSE:PNR) latest earnings update in December 2018 indicated that the business benefited from a major tailwind, more than doubling its earnings from the prior year. Below, I’ve laid out key numbers on how market analysts perceive Pentair’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ outlook for next year seems positive, with earnings expanding by a robust 28%. This growth seems to continue into the following year with rates arriving at double digit 40% compared to today’s earnings, and finally hitting US$444m by 2022.
Even though it’s useful to be aware of the growth rate each year relative to today’s value, it may be more beneficial analyzing the rate at which the company is moving every year, on average. The pro of this approach is that it ignores near term flucuations and accounts for the overarching direction of Pentair’s earnings trajectory over time, fluctuate up and down. To compute this rate, I put 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 12%. This means, we can expect Pentair will grow its earnings by 12% every year for the next couple of years.
For Pentair, there are three fundamental aspects 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 PNR 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 PNR is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PNR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.