How Do Analysts See Advance Auto Parts Inc (NYSE:AAP) Performing Over The Next Few Years?
The latest earnings announcement Advance Auto Parts Inc’s (NYSE:AAP) released in December 2017 revealed that the business benefited from a small tailwind, leading to a single-digit earnings growth of 3.46%. Investors may find it useful to understand how market analysts perceive Advance Auto Parts’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. See our latest analysis for Advance Auto Parts
Market analysts’ consensus outlook for the upcoming year seems pessimistic, with earnings decreasing by a double-digit -18.56%. In the next couple of years, earnings will begin to improve, rising year on year, and reaching US$517.95M by 2021.
Although it’s informative understanding the growth rate each year relative to today’s value, it may be more valuable analyzing the rate at which the earnings are rising or falling on average every year. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Advance Auto Parts’s earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I’ve inserted 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 1.65%. This means that, we can assume Advance Auto Parts will grow its earnings by 1.65% every year for the next couple of years.
Next Steps:
For Advance Auto Parts, there are three relevant 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 AAP 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 AAP is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of AAP? 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 pass 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.
