Looking at DICK'S Sporting Goods, Inc.'s (NYSE:DKS) earnings update in February 2019, analyst forecasts appear to be bearish, with profits predicted to drop by 3.5% next year. However, this pessimism is not unsubstantiated given the negative earnings growth rate over the past five years on average. With trailing-twelve-month net income at current levels of US$320m, the consensus growth rate suggests that earnings will decline to US$309m by 2020. Below is a brief commentary around DICK'S Sporting Goods's earnings outlook going forward, which may give you a sense of market sentiment for the company. For those interested in more of an analysis of the company, you can research its fundamentals here.
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Can we expect DICK'S Sporting Goods to keep growing?
Over the next three years, it seems the consensus view of the 22 analysts covering DKS is skewed towards the negative 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 DKS's earnings growth over these next few years.
From the current net income level of US$320m and the final forecast of US$305m by 2022, the annual rate of growth for DKS’s earnings is -0.7%. However, if we exclude extraordinary items from earnings, we see that the profits is predicted to rise over time, resulting in an EPS of $3.6 in the final year of forecast compared to the current $3.27 EPS today. The main reason for DKS’s earnings contraction is cost outpacing top line growth of 1.2% over the next few years. Furthermore, the current 3.8% margin is expected to contract to 3.5% by the end of 2022.
Future outlook is only one aspect when you're building an investment case for a stock. For DICK'S Sporting Goods, I've put together three essential factors you should further research:
- 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 DICK'S Sporting Goods 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 DICK'S Sporting Goods is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of DICK'S Sporting Goods? 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.