The latest earnings update Qantas Airways Limited (ASX:QAN) released in June 2018 revealed that the company benefited from a robust tailwind, leading to a double-digit earnings growth of 15.0%. Below is a brief commentary on my key takeaways on how market analysts perceive Qantas Airways’s earnings growth outlook 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.
Analysts’ expectations for next year seems rather subdued, with earnings growing by a single digit 6.2%. The following years do not look much more exciting, with earnings reaching AU$1.07b before falling in 2021.
Even though it is helpful to be aware of the growth rate year by year relative to today’s figure, it may be more insightful determining the rate at which the business is growing every year, on average. The advantage of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Qantas Airways’s earnings trajectory over time, be more volatile. To calculate 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 0.7%. This means, we can presume Qantas Airways will grow its earnings by 0.7% every year for the next few years.
For Qantas Airways, I’ve compiled three relevant aspects 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 QAN 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 QAN is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of QAN? 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.