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DS Smith Plc (LON:SMDS): What Does The Future Look Like?

Simply Wall St

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On 30 April 2019, DS Smith Plc (LON:SMDS) released its earnings update. Generally, it seems that analyst forecasts are substantially optimistic, with earnings expected to grow by a high double-digit of 97% in the upcoming year, relative to the historical 5-year average growth rate of 14%. Presently, with latest-twelve-month earnings at UK£262m, we should see this growing to UK£517m by 2020. Below is a brief commentary around DS Smith's earnings outlook going forward, which may give you a sense of market sentiment for the company. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for DS Smith

How is DS Smith going to perform in the near future?

The 13 analysts covering SMDS view its longer term outlook with a positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of SMDS's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:SMDS Past and Future Earnings, July 2nd 2019

From the current net income level of UK£262m and the final forecast of UK£397m by 2022, the annual rate of growth for SMDS’s earnings is 13%. This leads to an EPS of £0.29 in the final year of projections relative to the current EPS of £0.20. Margins are currently sitting at 4.2%, which is expected to expand to 5.6% by 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For DS Smith, there are three important factors you should further research:

  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 DS Smith 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 DS Smith is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of DS Smith? 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.