In December 2018, Northern Trust Corporation (NASDAQ:NTRS) announced its latest earnings update, which indicated that the business benefited from a robust tailwind, eventuating to a double-digit earnings growth of 32%. Today I want to provide a brief commentary on how market analysts predict Northern Trust'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.
Market analysts' consensus outlook for next year seems pessimistic, with earnings decreasing by -3.9%. But in the following year, there is a complete contrast in performance, with generating double digit 2.3% compared to today’s level and continues to increase to US$1.7b in 2022.
Even though it is helpful to understand the growth year by year relative to today’s value, it may be more valuable gauging the rate at which the earnings are rising or falling on average every year. The pro of this approach is that it removes the impact of near term flucuations and accounts for the overarching direction of Northern Trust's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put 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 2.4%. This means that, we can assume Northern Trust will grow its earnings by 2.4% every year for the next few years.
For Northern Trust, there are three relevant aspects you should look at:
- 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 NTRS 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 NTRS is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of NTRS? 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 email@example.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.