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What Can We Expect From Persimmon Plc's (LON:PSN) Earnings Over The Next Year?

Simply Wall St

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Looking at Persimmon Plc's (LON:PSN) earnings update in December 2018, the consensus outlook from analysts appear pessimistic, with earnings expected to decline by 6.0% in the upcoming year compared with the past 5-year average growth rate of 22%. Presently, with latest-twelve-month earnings at UK£886m, we should see this fall to UK£833m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Persimmon in the longer term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

See our latest analysis for Persimmon

How will Persimmon perform in the near future?

Longer term expectations from the 14 analysts covering PSN’s stock is one of negative sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To understand the overall trajectory of PSN's earnings growth over these next fews years, I've fitted a line through these analyst earnings forecast to determine an annual growth rate from the slope.

LSE:PSN Past and Future Earnings, July 19th 2019

This results in an annual growth rate of -1.7% based on the most recent earnings level of UK£886m to the final forecast of UK£846m by 2022. This leads to an EPS of £2.73 in the final year of projections relative to the current EPS of £2.83. Earnings decline appears to be a result of cost outpacing top line growth of 1.6% over the next few years. Furthermore, the current 24% margin is expected to contract to 22% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Persimmon, I've put together three key factors you should look at:

  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 Persimmon 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 Persimmon is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Persimmon? 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.