What Do Analysts Think About Premier Oil plc's (LON:PMO) Future?
On 31 December 2018, Premier Oil plc (LON:PMO) released its earnings update. Generally, analysts seem cautiously optimistic, as a 50% increase in profits is expected in the upcoming year, compared with the past 5-year average growth rate of -2.1%. By 2020, we can expect Premier Oil’s bottom line to reach US$157m, a jump from the current trailing-twelve-month of US$105m. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Premier Oil in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
View our latest analysis for Premier Oil
Exciting times ahead?
The 9 analysts covering PMO view its longer term outlook with a negative sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To reduce the year-on-year volatility of analyst earnings forecast, I've inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
This results in an annual growth rate of -5.4% based on the most recent earnings level of US$105m to the final forecast of US$137m by 2022. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $0.17 in the final year of forecast compared to the current $0.14 EPS today. The primary reason for earnings contraction is due to a reduction in the top line of -1.9%, squeezing the bottom line. With margins currently sitting at 7.5%, this fall in revenues is expected to cause margin expansion to 9.6% by 2022.
Next Steps:
Future outlook is only one aspect when you're building an investment case for a stock. For Premier Oil, I've compiled three key 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 Premier Oil 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 Premier Oil is currently mispriced by the market.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Premier Oil? 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 editorial-team@simplywallst.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.
