Based on A. O. Smith Corporation's (NYSE:AOS) earnings update in March 2019, analysts seem cautiously bearish, with profits predicted to rise by 4.1% next year relative to the higher past 5-year average growth rate of 15%. With trailing-twelve-month net income at current levels of US$444m, we should see this rise to US$462m in 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for A. O. Smith in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Exciting times ahead?
The longer term expectations from the 10 analysts of AOS 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. To get an idea of the overall earnings growth trend for AOS, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2022, AOS's earnings should reach US$545m, from current levels of US$444m, resulting in an annual growth rate of 7.1%. EPS reaches $3.25 in the final year of forecast compared to the current $2.6 EPS today. With a current profit margin of 14%, this movement will result in a margin of 15% by 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For A. O. Smith, there are three fundamental factors 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 A. O. Smith 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 A. O. Smith is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of A. O. Smith? 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.