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Will Computershare Limited's (ASX:CPU) Earnings Grow Over The Next Few Years?

Simply Wall St

The latest earnings release Computershare Limited's (ASX:CPU) announced in August 2019 indicated that the company gained from a strong tailwind, leading to a double-digit earnings growth of 39%. Below, I've laid out key numbers on how market analysts perceive Computershare's earnings growth outlook over the next few 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.

See our latest analysis for Computershare

Analysts' outlook for the coming year seems pessimistic, with earnings falling by a double-digit -26%. In the next couple of years, earnings are expected to continue to be below today's level, with a decline of -19% in 2021, eventually reaching US$337m in 2022.

ASX:CPU Past and Future Earnings, September 13th 2019

Although it is helpful to be aware of the growth rate year by year relative to today’s figure, it may be more beneficial evaluating the rate at which the business is growing every year, on average. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Computershare's earnings trajectory over time, which may be more relevant for long term investors. 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 -0.5%. This means that, we can expect Computershare will chip away at a rate of -0.5% every year for the next few years.

Next Steps:

For Computershare, I've put together three relevant factors 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 CPU 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 CPU is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CPU? 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.