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What Should We Expect From VMware, Inc.'s (NYSE:VMW) Earnings In The Next 12 Months?

Simply Wall St

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Based on VMware, Inc.'s (NYSE:VMW) earnings update on 03 May 2019, the consensus outlook from analysts appear somewhat bearish, with earnings expected to grow by 2.5% in the upcoming year against the higher past 5-year average growth rate of 17%. With trailing-twelve-month net income at current levels of US$2.4b, we should see this rise to US$2.5b in 2020. Below is a brief commentary on the longer term outlook the market has for VMware. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for VMware

What can we expect from VMware in the longer term?

The longer term expectations from the 29 analysts of VMW is tilted towards the positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To understand the overall trajectory of VMW'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.

NYSE:VMW Past and Future Earnings, June 23rd 2019

By 2022, VMW's earnings should reach US$2.9b, from current levels of US$2.4b, resulting in an annual growth rate of 7.7%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of $5.64 in the final year of forecast compared to the current $5.94 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 27% to 25% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For VMware, I've compiled three pertinent aspects 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 VMware 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 VMware is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of VMware? 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.