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Based on STMicroelectronics N.V.’s (EPA:STM) recently announced earnings update on 31 December 2018, analyst forecasts seem pessimistic, with profits predicted to drop by -15% next year against the past 5-year average growth rate of 66%. Presently, with latest-twelve-month earnings at US$1.3b, we should see this fall to US$1.1b by 2020. In this article, I’ve outline a few earnings growth rates to give you a sense of the market sentiment for STMicroelectronics in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
What can we expect from STMicroelectronics in the longer term?
The view from 14 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of STM’s earnings growth over these next fews years, I’ve fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
This results in an annual growth rate of 1.7% based on the most recent earnings level of US$1.3b to the final forecast of US$1.3b by 2022. This leads to an EPS of $1.46 in the final year of projections relative to the current EPS of $1.43. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 13% to 12% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For STMicroelectronics, I’ve put together three relevant 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 STMicroelectronics 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 STMicroelectronics is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of STMicroelectronics? 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.