What Should We Expect From GlaxoSmithKline plc’s (LON:GSK) Earnings In The Years Ahead?
GlaxoSmithKline plc’s (LSE:GSK) latest earnings update in September 2017 confirmed that the company faced a immense headwind with earnings falling by -89.17%. Below, I’ve laid out key growth figures on how market analysts predict GlaxoSmithKline’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings. Check out our latest analysis for GlaxoSmithKline
Market analysts’ consensus outlook for the upcoming year seems optimistic, with earnings climbing by a significant 66.88%. This high growth in earnings is expected to continue, bringing the bottom line up to £4,858.8M by 2021.
Although it is helpful to understand the growth rate year by year relative to today’s level, it may be more beneficial gauging the rate at which the earnings are rising or falling on average every year. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of GlaxoSmithKline’s earnings trajectory over time, 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 13.08%. This means, we can assume GlaxoSmithKline will grow its earnings by 13.08% every year for the next couple of years.
Next Steps:
For GlaxoSmithKline, I’ve compiled three key 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 GSK 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 GSK is currently mispriced by the market.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of GSK? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
