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Z Energy Limited's (NZSE:ZEL) latest earnings announcement in May 2019 revealed that the business experienced a significant headwind with earnings deteriorating by -29%. Today I want to provide a brief commentary on how market analysts view Z Energy's earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts' prospects for this coming year seems rather muted, with earnings increasing by a single digit 7.5%. The growth outlook in the following year seems much more optimistic with rates reaching double digit 18% compared to today’s earnings, and finally hitting NZ$219m by 2022.
While it is informative understanding the rate of growth year by year relative to today’s level, it may be more insightful to analyze the rate at which the business is rising or falling every year, on average. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Z Energy's earnings trajectory over time, fluctuate up and down. To calculate 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 5.7%. This means, we can presume Z Energy will grow its earnings by 5.7% every year for the next few years.
For Z Energy, I've compiled three fundamental aspects 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 ZEL 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 ZEL is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ZEL? 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.