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Looking at Severn Trent Plc's (LON:SVT) earnings update in March 2019, analyst consensus outlook seem bearish, with earnings expected to decline by 7.1% in the upcoming year compared with the past 5-year average growth rate of 0.2%. Presently, with latest-twelve-month earnings at UK£315m, we should see this fall to UK£293m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
Over the next three years, it seems the consensus view of the 12 analysts covering SVT is skewed towards the positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for SVT, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
From the current net income level of UK£315m and the final forecast of UK£283m by 2022, the annual rate of growth for SVT’s earnings is 2.1%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of £1.17 in the final year of forecast compared to the current £1.33 EPS today. However, the near term margins may change heading into 2022, from the current levels of 18% to 15%.
Future outlook is only one aspect when you're building an investment case for a stock. For Severn Trent, there are three fundamental 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 Severn Trent 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 Severn Trent is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Severn Trent? 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 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.