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Based on Vesuvius plc's (LON:VSVS) earnings update in December 2018, the consensus outlook from analysts appear pessimistic, as a 7.4% fall in profits is expected in the upcoming year. However, this pessimism is not unfounded, given the 5-year track record of negative growth of -7.5%. Currently with a trailing-twelve-month profit of UK£138m, the consensus growth rate suggests that earnings will drop to UK£128m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for Vesuvius in the longer term. Investors wanting to learn more about other aspects of the company should research its fundamentals here.
Exciting times ahead?
The view from 12 analysts over the next three years is one of positive 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 VSVS'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.
This results in an annual growth rate of 3.8% based on the most recent earnings level of UK£138m to the final forecast of UK£148m by 2022. This leads to an EPS of £0.56 in the final year of projections relative to the current EPS of £0.51. Margins are currently sitting at 7.7%, approximately the same as previous years. With analysts forecasting revenue growth of 0.08364 and VSVS's net income growth expected to roughly track that, this company may add value for shareholders over time.
Future outlook is only one aspect when you're building an investment case for a stock. For Vesuvius, I've put together three pertinent factors you should further examine:
- 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 Vesuvius 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 Vesuvius is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Vesuvius? 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 firstname.lastname@example.org. 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.