NorthWestern Corporation's (NYSE:NWE) released its most recent earnings update in December 2018, which confirmed that the company benefited from a robust tailwind, leading to a double-digit earnings growth of 21%. Below is my commentary, albeit very simple and high-level, on how market analysts predict NorthWestern's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Analysts' outlook for the upcoming year seems pessimistic, with earnings declining by a double-digit -11%. In the next couple of years, earnings will begin to improve, rising year on year, and generating US$187m by 2022.
Even though it is helpful to understand the growth year by year relative to today’s value, it may be more insightful evaluating the rate at which the business is rising or falling every year, on average. The advantage of this technique is that we can get a better picture of the direction of NorthWestern'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 inserted 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 2.2%. This means, we can anticipate NorthWestern will grow its earnings by 2.2% every year for the next few years.
For NorthWestern, I've put together three relevant aspects you should look at:
- 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 NWE 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 NWE is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NWE? 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.