Babcock International Group PLC’s (LON:BAB) latest earnings announcement in March 2018 revealed that the business benefited from a small tailwind, leading to a single-digit earnings growth of 7.9%. Today I want to provide a brief commentary on how market analysts view Babcock International Group’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Market analysts’ consensus outlook for next year seems pessimistic, with earnings reducing by -0.5%. But in the following year, there is a complete contrast in performance, with generating double digit 2.9% compared to today’s level and continues to increase to UK£391m in 2021.
While it’s helpful to understand the rate of growth year by year relative to today’s level, it may be more beneficial to estimate the rate at which the company is moving every year, on average. The benefit of this method is that we can get a bigger picture of the direction of Babcock International Group’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 put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 4.7%. This means that, we can anticipate Babcock International Group will grow its earnings by 4.7% every year for the next few years.
For Babcock International Group, I’ve put together three fundamental 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 BAB 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 BAB is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BAB? 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.