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The latest earnings announcement Autoliv, Inc. (NYSE:ALV) released in December 2018 indicated that the business faced a immense headwind with earnings declining by -12%. Below is my commentary, albeit very simple and high-level, on how market analysts perceive Autoliv’s earnings growth trajectory over the next couple of years and whether the future looks brighter. 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.
Analysts’ expectations for the upcoming year seems buoyant, with earnings growing by a significant 68%. This high growth in earnings is expected to continue, bringing the bottom line up to US$822m by 2022.
While it’s informative knowing the growth rate year by year relative to today’s value, it may be more beneficial to analyze the rate at which the business is moving every year, on average. The benefit of this technique is that we can get a bigger picture of the direction of Autoliv’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended 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 20%. This means that, we can assume Autoliv will grow its earnings by 20% every year for the next couple of years.
For Autoliv, I’ve put together three key aspects 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 ALV 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 ALV is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ALV? 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.