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Xcel Energy Inc.’s (NASDAQ:XEL) latest earnings update in December 2018 suggested that the business gained from a slight tailwind, eventuating to a single-digit earnings growth of 9.8%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Xcel Energy’s earnings growth outlook over the next few 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.
Market analysts’ consensus outlook for this coming year seems rather muted, with earnings climbing by a single digit 7.1%. The growth outlook in the following year seems much more positive with rates reaching double digit 15% compared to today’s earnings, and finally hitting US$1.6b by 2022.
Although it is informative understanding the growth rate year by year relative to today’s value, it may be more beneficial to analyze the rate at which the business is rising or falling on average every year. The advantage of this approach is that we can get a better picture of the direction of Xcel Energy’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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 6.6%. This means, we can expect Xcel Energy will grow its earnings by 6.6% every year for the next few years.
For Xcel Energy, I’ve put together three important 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 XEL 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 XEL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of XEL? 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.