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The latest earnings update Henry Schein, Inc. (NASDAQ:HSIC) released in December 2018 revealed that the business benefited from a robust tailwind, eventuating to a double-digit earnings growth of 32%. Investors may find it useful to understand how market analysts view Henry Schein's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts' expectations for the coming year seems pessimistic, with earnings falling by -1.9%. But in the following year, there is a complete contrast in performance, with reaching double digit 4.5% compared to today’s level and continues to increase to US$597m in 2022.
While it is informative understanding the rate of growth year by year relative to today’s level, it may be more beneficial to analyze the rate at which the business is rising or falling every year, on average. The benefit of this approach is that we can get a bigger picture of the direction of Henry Schein'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 appended 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 3.4%. This means that, we can anticipate Henry Schein will grow its earnings by 3.4% every year for the next couple of years.
For Henry Schein, I've compiled three essential 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 HSIC 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 HSIC is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of HSIC? 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.