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People’s United Financial, Inc.’s (NASDAQ:PBCT) most recent earnings update in December 2018 signalled that the company benefited from a robust tailwind, leading to a double-digit earnings growth of 41%. Below is a brief commentary on my key takeaways on how market analysts perceive People’s United Financial’s earnings growth trajectory 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’ expectations for the upcoming year seems buoyant, with earnings expanding by a robust 17%. This growth seems to continue into the following year with rates arriving at double digit 28% compared to today’s earnings, and finally hitting US$614m by 2022.
Although it is informative knowing the rate of growth each year relative to today’s level, it may be more beneficial to estimate the rate at which the earnings are moving on average every year. The advantage of this approach is that it ignores near term flucuations and accounts for the overarching direction of People’s United Financial’s earnings trajectory over time, which may be more relevant for long term investors. To compute 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 11%. This means, we can presume People’s United Financial will grow its earnings by 11% every year for the next few years.
For People’s United Financial, there are three pertinent factors 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 PBCT 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 PBCT is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PBCT? 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 past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.