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Anglo American plc (LON:AAL): Immense Growth Potential?

Simply Wall St

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Looking at Anglo American plc's (LON:AAL) earnings update in December 2018, the consensus outlook from analysts appear somewhat bearish, with earnings expected to grow by 9.1% in the upcoming year against the higher past 5-year average growth rate of 49%. By 2020, we can expect Anglo American’s bottom line to reach US$3.9b, a jump from the current trailing-twelve-month of US$3.5b. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Anglo American in the longer term. For those keen to understand more about other aspects of the company, you can research its fundamentals here.

Check out our latest analysis for Anglo American

Exciting times ahead?

Longer term expectations from the 17 analysts covering AAL’s stock is one of 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 understand the overall trajectory of AAL'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.

LSE:AAL Past and Future Earnings, June 27th 2019

This results in an annual growth rate of -1.4% based on the most recent earnings level of US$3.5b to the final forecast of US$3.3b by 2022. This leads to an EPS of $2.43 in the final year of projections relative to the current EPS of $2.8. Earnings decline appears to be a result of cost growth exceeding top-line growth of 2.1% in the next three years. With this high cost growth, margins is expected to contract from 13% to 11% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Anglo American, I've compiled three fundamental factors you should further research:

  1. 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.
  2. Valuation: What is Anglo American 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 Anglo American is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Anglo American? 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.