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Marshalls plc's (LON:MSLH) most recent earnings update in March 2019 showed that the business experienced a strong tailwind, eventuating to a double-digit earnings growth of 22%. Investors may find it useful to understand how market analysts predict Marshalls's earnings growth trajectory 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' expectations for this coming year seems rather muted, with earnings climbing by a single digit 7.9%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 14% compared to today’s earnings, and finally hitting UK£63m by 2022.
Although it is informative knowing the rate of growth year by year relative to today’s level, it may be more valuable evaluating the rate at which the company is moving on average every year. The advantage of this technique is that we can get a better picture of the direction of Marshalls's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I've appended 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 6.3%. This means that, we can expect Marshalls will grow its earnings by 6.3% every year for the next couple of years.
For Marshalls, I've compiled three relevant 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 MSLH 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 MSLH is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MSLH? 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.