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In December 2018, Oil Search Limited (ASX:OSH) released its earnings update. Generally, it seems that analyst forecasts are fairly optimistic, with profits predicted to increase by 40% next year relative to the past 5-year average growth rate of 0.2%. With trailing-twelve-month net income at current levels of US$341m, we should see this rise to US$477m in 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Oil Search in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.
How is Oil Search going to perform in the near future?
The longer term expectations from the 14 analysts of OSH is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of OSH's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.
From the current net income level of US$341m and the final forecast of US$538m by 2022, the annual rate of growth for OSH’s earnings is 7.1%. This leads to an EPS of $0.36 in the final year of projections relative to the current EPS of $0.22. In 2022, OSH's profit margin will have expanded from 22% to 31%.
Future outlook is only one aspect when you're building an investment case for a stock. For Oil Search, there are three pertinent 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 Oil Search 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 Oil Search is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Oil Search? 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 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.