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The most recent earnings announcement BorgWarner Inc.’s (NYSE:BWA) released in December 2018 signalled that the business experienced a significant tailwind, more than doubling its earnings from the prior year. Investors may find it useful to understand how market analysts view BorgWarner’s earnings growth outlook over the next few years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Analysts’ outlook for the upcoming year seems pessimistic, with earnings falling by -5.0%. But in the following year, there is a complete contrast in performance, with arriving at double digit 3.5% compared to today’s level and continues to increase to US$1.1b in 2022.
While it’s helpful to be aware of the growth each year relative to today’s value, it may be more insightful to analyze the rate at which the earnings are growing on average every year. The advantage of this method is that we can get a better picture of the direction of BorgWarner’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 inserted 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 6.4%. This means that, we can expect BorgWarner will grow its earnings by 6.4% every year for the next couple of years.
For BorgWarner, there are three relevant 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.
- Valuation: What is BWA 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 BWA is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of BWA? 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. On rare occasion, data errors may occur. Thank you for reading.