The latest earnings announcement Entergy Corporation (NYSE:ETR) released in December 2018 suggested that the company benefited from a substantial tailwind, more than doubling its earnings from the prior year. Below is my commentary, albeit very simple and high-level, on how market analysts view Entergy’s earnings growth trajectory over the next couple of 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.
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Market analysts’ consensus outlook for the coming year seems positive, with earnings expanding by a robust 16%. This growth seems to continue into the following year with rates reaching double digit 28% compared to today’s earnings, and finally hitting US$1.2b by 2022.
While it’s useful to understand the rate of growth year by year relative to today’s figure, it may be more beneficial to estimate the rate at which the business is rising or falling on average every year. The advantage of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Entergy’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 analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 11%. This means that, we can expect Entergy will grow its earnings by 11% every year for the next few years.
For Entergy, I’ve compiled three pertinent factors 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.
- Management:Have insiders been ramping up their shares to take advantage of the market’s sentiment for ETR’s future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ETR? 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.