The most recent earnings release Leidos Holdings, Inc.’s (NYSE:LDOS) announced in December 2018 revealed that the company benefited from a strong tailwind, eventuating to a high double-digit earnings growth of 59%. Below is a brief commentary on my key takeaways on how market analysts perceive Leidos Holdings’s earnings growth outlook over the next few 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.
Analysts’ outlook for next year seems rather subdued, with earnings climbing by a single digit 0.3%. The growth outlook in the following year seems much more optimistic with rates arriving at double digit 10% compared to today’s earnings, and finally hitting US$657m by 2022.
Even though it’s useful to understand the growth year by year relative to today’s level, it may be more valuable to evaluate the rate at which the earnings are rising or falling every year, on average. The advantage of this technique is that it ignores near term flucuations and accounts for the overarching direction of Leidos Holdings’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 4.7%. This means, we can expect Leidos Holdings will grow its earnings by 4.7% every year for the next few years.
For Leidos Holdings, 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 LDOS 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 LDOS is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of LDOS? 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 email@example.com. 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.