The latest earnings update MTU Aero Engines AG’s (XTRA:MTX) released in December 2017 suggested that the business gained from a robust tailwind, leading to a double-digit earnings growth of 21.14%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive MTU Aero Engines’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. View our latest analysis for MTU Aero Engines
Market analysts’ consensus outlook for the coming year seems rather subdued, with earnings growing by a single digit 4.66%. The growth outlook in the following year seems much more buoyant with rates reaching double digit 12.76% compared to today’s earnings, and finally hitting €456.83M by 2021.
Although it’s useful to be aware of the growth year by year relative to today’s figure, it may be more beneficial to analyze the rate at which the earnings are rising or falling every year, on average. The benefit of this method is that we can get a better picture of the direction of MTU Aero Engines’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 put 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 6.55%. This means, we can expect MTU Aero Engines will grow its earnings by 6.55% every year for the next few years.
For MTU Aero Engines, I’ve compiled 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 MTX 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 MTX is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of MTX? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.