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The latest earnings update Bunzl plc (LON:BNZL) released in March 2019 confirmed that the business benefited from a slight tailwind, eventuating to a single-digit earnings growth of 5.2%. Today I want to provide a brief commentary on how market analysts perceive Bunzl's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Analysts' expectations for next year seems rather muted, with earnings rising by a single digit 7.1%. The growth outlook in the following year seems much more optimistic with rates reaching double digit 15% compared to today’s earnings, and finally hitting UK£391m by 2022.
Although it’s useful to be aware of the rate of growth year by year relative to today’s level, it may be more valuable evaluating the rate at which the business is moving on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Bunzl's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've inserted 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 6.1%. This means, we can anticipate Bunzl will grow its earnings by 6.1% every year for the next couple of years.
For Bunzl, there are three fundamental factors you should look at:
- 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 BNZL 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 BNZL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BNZL? 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 firstname.lastname@example.org. 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.