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What Can We Expect From Derwent London Plc's (LON:DLN) Earnings In The Year Ahead?

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In December 2018, Derwent London Plc (LON:DLN) released its earnings update. Generally, analyst consensus outlook appear pessimistic, as a -9.4% fall in profits is expected in the upcoming year. Though compared to its 5-year track record of the average earnings growth rate of -25%, this is still an improvement. Currently with a trailing-twelve-month profit of UK£222m, the consensus growth rate suggests that earnings will drop to UK£202m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Derwent London in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for Derwent London

How will Derwent London perform in the near future?

The view from 8 analysts over the next three years is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To get an idea of the overall earnings growth trend for DLN, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.

LSE:DLN Past and Future Earnings, March 30th 2019
LSE:DLN Past and Future Earnings, March 30th 2019

This results in an annual growth rate of 9.8% based on the most recent earnings level of UK£222m to the final forecast of UK£281m by 2022. EPS reaches £2.45 in the final year of forecast compared to the current £1.99 EPS today. In 2022, DLN's profit margin will have expanded from 97% to 123%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Derwent London, I've put together three pertinent factors you should further examine:

  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 Derwent London 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 Derwent London is currently mispriced by the market.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Derwent London? 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.