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Mainfreight Limited's (NZSE:MFT) released its most recent earnings update in May 2019, which suggested that the business gained from a robust tailwind, eventuating to a double-digit earnings growth of 28%. Investors may find it useful to understand how market analysts view Mainfreight's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts' expectations for this coming year seems buoyant, with earnings climbing by a robust 18%. This growth seems to continue into the following year with rates reaching double digit 30% compared to today’s earnings, and finally hitting NZ$196m by 2022.
Although it’s helpful to understand the growth year by year relative to today’s value, it may be more valuable evaluating the rate at which the earnings are moving every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Mainfreight'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 11%. This means that, we can expect Mainfreight will grow its earnings by 11% every year for the next couple of years.
For Mainfreight, I've put together three important 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 MFT 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 MFT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MFT? 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.