On 31 December 2018, Sotheby’s (NYSE:BID) released its earnings update. Generally, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 22% next year against the past 5-year average growth rate of -7.2%. Presently, with latest-twelve-month earnings at US$107m, we should see this growing to US$130m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
Can we expect Sotheby’s to keep growing?
The 7 analysts covering BID view its longer term outlook with a 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 BID’s earnings growth over these next few years.
This results in an annual growth rate of 13% based on the most recent earnings level of US$107m to the final forecast of US$165m by 2022. This leads to an EPS of $3.48 in the final year of projections relative to the current EPS of $2.1. Margins are currently sitting at 10%, which is expected to expand to 15% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Sotheby’s, I’ve put together three essential factors 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 Sotheby’s 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 Sotheby’s is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sotheby’s? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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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.