Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
The most recent earnings announcement Eaton Corporation plc’s (NYSE:ETN) released in December 2018 suggested that the business endured a immense headwind with earnings declining by -28%. Below, I’ve presented key growth figures on how market analysts perceive Eaton’s earnings growth trajectory over the next couple of years and whether the future looks brighter. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ outlook for the coming year seems optimistic, with earnings expanding by a robust 17%. This growth seems to continue into the following year with rates reaching double digit 21% compared to today’s earnings, and finally hitting US$2.7b by 2022.
While it is useful to understand the growth year by year relative to today’s figure, it may be more beneficial to evaluate the rate at which the business is moving on average every year. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of Eaton’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 the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.4%. This means, we can presume Eaton will grow its earnings by 7.4% every year for the next few years.
For Eaton, I’ve put together three relevant factors 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 ETN 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 ETN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ETN? 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.