Based on MKS Instruments, Inc.'s (NASDAQ:MKSI) earnings update in December 2018, it seems that analyst expectations are fairly bearish, with profits predicted to rise by -26% next year compared with the higher past 5-year average growth rate of 39%. Currently with trailing-twelve-month earnings of US$393m, we can expect this to reach US$289m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those interested in more of an analysis of the company, you can research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 4 analysts of MKSI is tilted towards the positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of MKSI's earnings growth over these next few years.
From the current net income level of US$393m and the final forecast of US$470m by 2022, the annual rate of growth for MKSI’s earnings is 4.2%. This leads to an EPS of $8.31 in the final year of projections relative to the current EPS of $7.22. This high rate of growth of revenue squeezes margins, as analysts predict an upcoming margin contraction from the current 19% to 18% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For MKS Instruments, I've compiled three fundamental 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 MKS Instruments 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 MKS Instruments is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of MKS Instruments? 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.