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Ansell Limited (ASX:ANN): Are Analysts Right About The Drop In Earnings?

Looking at Ansell Limited’s (ASX:ANN) earnings update in June 2018, analyst consensus outlook appear bearish, with earnings expected to decline by -5.1% in the upcoming year against the past 5-year average growth rate of 4.1%. With trailing-twelve-month net income at current levels of US$139m, the consensus growth rate suggests that earnings will decline to US$132m by 2019. I will provide a brief commentary around the figures and analyst expectations in the near term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

View our latest analysis for Ansell

How will Ansell perform in the near future?

The view from 11 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of ANN’s earnings growth over these next few years.

ASX:ANN Future Profit November 15th 18

This results in an annual growth rate of 4.6% based on the most recent earnings level of US$139m to the final forecast of US$156m by 2021. This leads to an EPS of $1.14 in the final year of projections relative to the current EPS of $0.96. The primary reason for earnings growth is due to cost cutting activities, as revenues is expected to grow much slower than earnings. With a current profit margin of 9.3%, this movement will result in a margin of 9.5% by 2021.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Ansell, I’ve compiled three important aspects you should look at:

  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 Ansell 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 Ansell is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ansell? 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 editorial-team@simplywallst.com.