BRP Inc (TSE:DOO): Is It A Good Long Term Opportunity?
BRP Inc’s (TSX:DOO) most recent earnings announcement in January 2018 suggested that the business benefited from a slight tailwind, eventuating to a single-digit earnings growth of 6.61%. Investors may find it useful to understand how market analysts perceive BRP’s earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings. Check out our latest analysis for BRP
Market analysts’ prospects for this coming year seems rather muted, with earnings growing by a single digit 2.39%. The growth outlook in the following year seems much more buoyant with rates generating double digit 14.96% compared to today’s earnings, and finally hitting CA$344.58M by 2021.
While it is informative understanding the rate of growth each year relative to today’s figure, it may be more valuable to analyze the rate at which the company is moving every year, on average. The benefit of this technique is that it removes the impact of near term flucuations and accounts for the overarching direction of BRP’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 7.50%. This means that, we can presume BRP will grow its earnings by 7.50% every year for the next couple of years.
Next Steps:
For BRP, there are three essential aspects you should further examine:
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 DOO 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 DOO is currently mispriced by the market.
Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DOO? 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 pass 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.
