Based on BHP Group's (ASX:BHP) earnings update on 30 June 2019, analysts seem fairly confident, with profits predicted to increase by 31% next year against the past 5-year average growth rate of 8.9%. By 2020, we can expect BHP Group’s bottom line to reach US$11b, a jump from the current trailing-twelve-month of US$8.6b. Below is a brief commentary around BHP Group's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Exciting times ahead?
Over the next three years, it seems the consensus view of the 22 analysts covering BHP is skewed towards the 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 BHP'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.
From the current net income level of US$8.6b and the final forecast of US$12b by 2022, the annual rate of growth for BHP’s earnings is 3.5%. EPS reaches $1.73 in the final year of forecast compared to the current $1.67 EPS today. With a current profit margin of 19%, this movement will result in a margin of 26% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For BHP Group, there are three essential 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 BHP 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 BHP Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of BHP 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.