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Based on Babcock International Group PLC's (LON:BAB) earnings update in March 2019, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 42% next year compared with the past 5-year average growth rate of 4.5%. Currently with trailing-twelve-month earnings of UK£199m, we can expect this to reach UK£284m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
What can we expect from Babcock International Group in the longer term?
Over the next three years, it seems the consensus view of the 9 analysts covering BAB 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 reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
By 2022, BAB's earnings should reach UK£306m, from current levels of UK£199m, resulting in an annual growth rate of 11%. This leads to an EPS of £0.61 in the final year of projections relative to the current EPS of £0.39. Margins are currently sitting at 4.5%, which is expected to expand to 6.1% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For Babcock International Group, there are three important aspects you should further examine:
- 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 Babcock International Group 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 Babcock International Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Babcock International Group? 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.