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Ferguson plc (LON:FERG): Is It A Smart Long Term Opportunity?

Simply Wall St

Since Ferguson plc (LON:FERG) released its earnings in January 2019, analyst consensus outlook appear cautiously optimistic, with profits predicted to increase by 18% next year relative to the past 5-year average growth rate of 10%. Presently, with latest-twelve-month earnings at US$841m, we should see this growing to US$990m by 2020. Below is a brief commentary on the longer term outlook the market has for Ferguson. For those interested in more of an analysis of the company, you can research its fundamentals here.

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View our latest analysis for Ferguson

What can we expect from Ferguson in the longer term?

The 21 analysts covering FERG view its longer term outlook with a positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of FERG's earnings growth over these next few years.

LSE:FERG Past and Future Earnings, May 18th 2019

This results in an annual growth rate of 8.1% based on the most recent earnings level of US$841m to the final forecast of US$1.1b by 2022. This leads to an EPS of $5.3 in the final year of projections relative to the current EPS of $3.61. In 2022, FERG's profit margin will have expanded from 4.1% to 4.8%.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For Ferguson, I've compiled three fundamental factors you should further research:

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